DELAWARE
|
11-2920559
|
(State
or Other Jurisdiction of Incorporation
or Organization)
|
(I.R.S.
Employer Identification
Number)
|
TITLE
OF EACH CLASS OF
SECURITIES
TO BE REGISTERED
|
AMOUNT
TO BE
REGISTERED
|
PROPOSED
MAXIMUM
OFFERING
PRICE
PER SHARE(1)
|
PROPOSED
MAXIMUM
AGGREGATE
OFFERING
PRICE
|
AMOUNT
OF
REGISTRATION
FEE
|
Common
Stock, par value $.001 per share (2)
|
40,641,978
|
$1.11
|
$45,122,595.62
|
$1,384.96
|
(1)
|
Estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457(c ) under the Securities Act of 1933 and based upon
the
average high and low prices of the registrant’s common stock on the Over
the Counter Bulletin Board on April 16, 2007.
|
(2)
|
Includes
Common Stock, par value $.001 per share (issuable upon the conversion
of
preferred stock), and Common Stock, par value $.001 per share (issuable
upon the exercise of warrants. This Registration Statement also carries
forward the registration of 449,476 shares of Level 8 Systems common
stock, $.001 par value on Form S-1 filed May 18, 2004. A Registration
Fee
$595 of was previously paid to register such
securities.
|
·
|
the
selling stockholders currently
hold;
|
·
|
issuable
to them upon the conversion of outstanding convertible preferred
stock;
and
|
·
|
issuable
to them upon the exercise of warrants previously
issued
|
ABOUT
THIS PROSPECTUS
|
i
|
Prospectus
Summary
|
1
|
Risk
Factors
|
3
|
Use
of Proceeds
|
8
|
Price
Range of Our Common Stock
|
8
|
Dividend
Policy
|
8
|
Selling
Stockholders
|
9
|
Plan
of Distribution
|
27
|
Selected
Consolidated Financial Data
|
28
|
Business
|
29
|
Properties
|
42
|
Legal
Proceedings
|
42
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
44
|
Significant
Accounting Policies and Estimates
|
51
|
Management
|
55
|
Executive
Compensation
|
58
|
Principal
Stockholders
|
60
|
Certain
Relationships and Related Party Transactions
|
62
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
64
|
Description
of Capital Stock
|
64
|
Legal
Matters
|
65
|
Experts
|
65
|
Available
Information
|
65
|
Index
to Financial Statements
|
F-1
|
·
|
There
is substantial doubt as to whether we can continue as a going concern;
|
·
|
We
have a history of losses and expect that we will continue to experience
losses at least through mid 2007;
|
·
|
We
develop new and unproven technology and
products;
|
·
|
We
depend on an unproven strategy for ongoing revenue;
|
·
|
Economic
conditions could adversely affect our revenue growth and cause us
not to
achieve desired revenue;
|
·
|
The
so-called “penny stock rule” could make it cumbersome for brokers and
dealers to trade in our common stock, making the market for our common
stock less liquid which could cause the price of our stock to
decline;
|
·
|
Because
we cannot accurately predict the amount and timing of individual
sales,
our quarterly operating results may vary significantly, which could
adversely impact our stock price;
|
·
|
Loss
of key personnel associated with Cicero® development could adversely
affect our business;
|
·
|
Different
competitive approaches or internally developed solutions to the same
business problem could delay or prevent adoption of
Cicero®;
|
·
|
Our
ability to compete may be subject to factors outside our
control;
|
·
|
The
markets for our products are characterized by rapidly changing
technologies, evolving industry standards, and frequent new product
introductions;
|
·
|
We
may face damage to the reputation of our software and a loss of revenue
if
our software products fail to perform as intended or contain significant
defects;
|
·
|
We
may be unable to enforce or defend our ownership and use of proprietary
and licensed technology;
|
·
|
Our
business may be adversely impacted if we do not provide professional
services to implement our
solutions;
|
·
|
Because
our software could interfere with the operations of customers, we
may be
subject to potential product liability and warranty claims by these
customers;
|
·
|
We
have not paid any cash dividends on our common stock and it is likely
that
no cash dividends will be paid in the future;
and
|
·
|
Provisions
of our charter and bylaws and Delaware law could deter takeover
attempts.
|
·
|
Provided
our Board of Directors with discretionary authority, pursuant to
the plan
of recapitalization to effect a reverse stock at a ratio of 20:1
to 100:1,
and on November 20, 2006 our Board of Directors fixed the ratio at
100:1;
|
·
|
Changed
the name of the Company from Level 8 Systems, Inc. to Cicero
Inc.;
|
·
|
Increased
the authorized common stock of the Company from 85 million shares
to 215
million shares;
|
·
|
Converted
existing preferred shares into a new Series A-1 Preferred
Stock;
|
·
|
Converted
and cancelled senior reorganization debt in the aggregate principal
amount
of $2.3 million into 3,438,473 shares of common stock;
|
·
|
Converted
the aggregate principal amount of $3.9 million of convertible bridge
notes
into 30,508,448 shares of our common
stock;
|
·
|
Converted
each share of Series A3 Preferred Stock into 4.489 shares of Series
A-1
Preferred Stock;
|
·
|
Converted
each share of Series B3 Preferred Stock into 75 shares of Series
A-1
Preferred Stock;
|
·
|
Converted
each share of Series C Preferred Stock into 39.64 shares of Series
A-1
Preferred Stock;
|
·
|
Converted
an aggregate principal amount of $1,060,562 of Series D Preferred
Stock,
recorded as mezzanine financing, into 53 Preferred Stock;
and
|
·
|
Converted
an aggregate principal amount of $992,000 of convertible promissory
notes
into 1,591 shares of Series A-1 Preferred
Stock.
|
·
|
Cicero®
was originally developed internally by Merrill Lynch and has no track
record of successful sales to organizations within the financial
services
industry and may not gain market acceptance;
|
·
|
We
are approaching a different segment of the financial services industry,
the customer contact center, compared to our sales and marketing
efforts
in the past and there can be no assurance that we can successfully
sell
and market into this industry; and
|
·
|
We
have had very limited success because the financial condition of
the
Company has caused concern for enterprise customers that would be
dependent on Cicero® for their long-term
needs.
|
·
|
make
a special suitability determination for purchasers of our
shares;
|
·
|
receive
the purchaser's written consent to the transaction prior to the purchase;
and
|
·
|
deliver
to a prospective purchaser of our stock, prior to the first transaction,
a
risk disclosure document relating to the penny stock
market.
|
2006
|
2005
|
||||||||||||
Quarter
|
High
|
Low
|
High
|
Low
|
|||||||||
First
|
$
|
3.00
|
$
|
1.80
|
$
|
16.00
|
$
|
7.00
|
|||||
Second
|
$
|
2.50
|
$
|
1.00
|
$
|
9.00
|
$
|
4.00
|
|||||
Third
|
$
|
2.10
|
$
|
1.10
|
$
|
5.00
|
$
|
2.00
|
|||||
Fourth
|
$
|
4.50
|
$
|
1.30
|
$
|
5.00
|
$
|
1.00
|
|||||
2007
|
|||||||||||||
Quarter
|
High
|
|
|
Low
|
|||||||||
First
|
$
|
2.52
|
$
|
1.11
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Landis,
Mark & Carolyn P.
|
5,143,613
|
(2)
|
|
QueeQueg
Partners, L.P.(a)
|
4,732,333
|
(3)
|
|
Steffens,
Launny
|
3,310,429
|
(4)
|
|
Kroll,
Jules
|
1,586,237
|
(5)
|
|
Paneyko,
Steve
|
1,557,159
|
(6)
|
|
Queequeg,
Ltd.(a)
|
1,504,938
|
(7)
|
|
Pizi,
Anthony
|
1,401,241
|
(8)
|
|
Ahab
International, Ltd.(a)
|
1,120,000
|
(9)
|
|
Briggs,
Jason
|
1,085,922
|
(10)
|
|
Percelay,
Bruce
|
1,032,786
|
(11)
|
|
Mack,
Fredric
|
1,018,194
|
(12)
|
|
Dugdale,
Glen & Joan
|
1,017,395
|
(13)
|
|
Miller,
Bruce
|
973,257
|
(14)
|
|
Lucas,
Scott
|
939,034
|
(15)
|
|
Ahab
Partners, LP (a)
|
880,000
|
(16)
|
|
Wagenhals,
Fred
|
802,593
|
(17)
|
|
Casey,
Kenneth
|
778,464
|
(18)
|
|
Lustgarten,
Scott
|
682,193
|
(19)
|
|
Keates,
Richard M.D.
|
558,988
|
(20)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Clement,
Conrad
|
513,145
|
(21)
|
|
Delphi
Partners Limited (b)
|
512,781
|
(22)
|
|
Stevens,
Jim
|
456,699
|
(23)
|
|
The
Landis Group (c )
|
402,134
|
(24)
|
|
The
Sorgen Group (d)
|
376,221
|
(25)
|
|
Liraz
Systems (e)
|
363,278
|
(26)
|
|
Nager
, Richard
|
344,679
|
(27)
|
|
Dugdale,
William C.
|
333,210
|
(28)
|
|
Lustgarten,
Martin estate of (f)
|
293,155
|
(29)
|
|
Dugdale,
CJ & JO CRT 1/17/96 (g)
|
265,870
|
(30)
|
|
Weitzman,
Hervey
|
249,933
|
(31)
|
|
Dugdale,
Glen B/D Trust FBO (h)
|
249,160
|
(32)
|
|
Sutro,
Marina
|
230,842
|
(33)
|
|
Leavitt,
Philip
|
227,300
|
(34)
|
|
Turner,
William & Barbara
|
224,977
|
(35)
|
|
Miller,
Jeanne
|
211,388
|
(36)
|
|
Nielsen,
Kenneth
|
201,294
|
(37)
|
|
North
Sound Legacy International Ltd.(i)
|
162,821
|
(38)
|
|
Grodko,
Steven
|
162,187
|
(39)
|
|
Wittenbach,
Roger
|
160,243
|
(40)
|
|
Mack,
Earle
|
154,248
|
(41)
|
|
Atherton,
John W. Jr.
|
148,784
|
(42)
|
|
Danko,
Brett
|
141,625
|
(43)
|
|
Spain,
Bernard
|
141,099
|
(44)
|
|
Dweck,
Ike
|
140,040
|
(45)
|
|
Howard,
Joan
|
136,640
|
(46)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Corwin,
Leonard
|
120,275
|
(47)
|
|
Advanced
Systems Europe, BV (j)
|
118,096
|
(48)
|
|
North
Sound Legacy Institutnl. Fund LLC (i)
|
112,592
|
(49)
|
|
Bank,
Marvin
|
111,522
|
(50)
|
|
Robinson,
Jonathon
|
105,382
|
(51)
|
|
Spivak,
David
|
101,914
|
(52)
|
|
Fields,
John
|
100,499
|
(53)
|
|
Harwood,
Chris
|
100,474
|
(54)
|
|
Wills,
Maurice
|
100,000
|
(55)
|
|
Koitz,
Martin
|
96,943
|
(56)
|
|
Weitzman,
Hannah
|
95,279
|
(57)
|
|
Blanck,
Richard
|
95,251
|
(58)
|
|
Haines
Family Assoc LP (k)
|
93,101
|
(59)
|
|
Emerson,
Alice
|
81,527
|
(60)
|
|
Morelli,
Luciano
|
80,534
|
(61)
|
|
Miller,
William R. FBO ROTH IRA (l)
|
80,415
|
(62)
|
|
Zinnert,
William C. III
|
80,349
|
(63)
|
|
Signorino,
Salvadore
|
80,326
|
(64)
|
|
Porciello,
Charles
|
80,286
|
(65)
|
|
Baena,
Douglas
|
67,842
|
(66)
|
|
Miller,
Douglas & Anita E.
|
64,294
|
(67)
|
|
Thinkcentric
(m)
|
60,829
|
(68)
|
|
Cohen,
Jeffrey C.
|
50,335
|
(69)
|
|
Lemery-Greisler,
LLC (n)
|
50,000
|
(70)
|
|
Cothren,
Tony
|
49,523
|
(71)
|
|
Lerner,
Arthur
|
48,952
|
(72)
|
|
Dugdale,
William K
|
46,355
|
(73)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
CGA
Resources, LLC (o)
|
45,527
|
(74)
|
|
Lobada,
Anna
|
43,365
|
(75)
|
|
McNamara,
William E.
|
41,320
|
(76)
|
|
Mack,
Fred Trust (Hailey Mack) (p)
|
40,874
|
(77)
|
|
Mack,
Fred Trust (Jason Mack)(p)
|
40,874
|
(77)
|
|
Lorenzo,
Val
|
40,227
|
(78)
|
|
Brooker,
James
|
40,207
|
(79)
|
|
Sutro,
Peter
|
40,192
|
(80)
|
|
Amchris
Consulting Group ,LLC (q)
|
40,163
|
(81)
|
|
Mikroulis,
Loula
|
40,153
|
(82)
|
|
Hathaway,
Devon D.
|
39,798
|
(83)
|
|
Forman,
Murray
|
38,923
|
(84)
|
|
Ganarche,
James
|
37,621
|
(85)
|
|
Grodko,
Sandra
|
36,145
|
(86)
|
|
Perl,
Jeffrey
|
34,967
|
(87)
|
|
Levine,
Robert A.
|
34,247
|
(88)
|
|
Hasenyager,
Bruce
|
32,652
|
(89)
|
|
Seneca
Capital, International (r)
|
32,248
|
(90)
|
|
Davis,
Bob
|
28,675
|
(91)
|
|
Dalal,
Pratik
|
28,291
|
(92)
|
|
Schneider,
Steven
|
27,803
|
(93)
|
|
Seneca
Capital, L.P (r)
|
25,798
|
(94)
|
|
The
Rittenhouse Group (s)
|
24,793
|
(95)
|
|
Harwood,
Brian
|
24,105
|
(96)
|
|
Kaliroff,
Joseph
|
20,845
|
(97)
|
|
Tesker,
Ron
|
20,089
|
(98)
|
|
Shelanski,
Joseph
|
19,489
|
(99)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Critical
Mass Mail (s)
|
18,243
|
(100)
|
|
Hatalski,
Nick
|
17,018
|
(101)
|
|
Leppo,
Robert D.
|
16,985
|
(102)
|
|
Mistretta,
Joseph
|
16,076
|
(103)
|
|
Weitzman,
Elizabeth
|
16,066
|
(104)
|
|
Broderick,
John
|
3,248
|
(105)
|
|
Chugh,
Narinder
|
15,555
|
(106)
|
|
Schwartz,
Andrew Living Trust (t)
|
14,138
|
(107)
|
|
Ryan,
Dennis
|
14,125
|
(108)
|
|
Weitzman,
Hervey Trustee Blackrock (u)
|
14,118
|
(109)
|
|
Koch,
June
|
14,090
|
(110)
|
|
Seidle,
Jay
|
13,699
|
(111)
|
|
Haines,
Roger
|
13,440
|
(112)
|
|
Nappi,
Joe
|
13,434
|
(113)
|
|
Dugdale,
Priscilla
|
13,422
|
(114)
|
|
Siracusa,
Richard
|
12,363
|
(115)
|
|
Hillman,
Brett
|
12,054
|
(116)
|
|
Mack,
Fredric 4-30-92 Trust (p)
|
11,499
|
(117)
|
|
Grunstein,
Leonard
|
10,741
|
(118)
|
|
Weiss,
Michael
|
9,435
|
(119)
|
|
Leavitt,
David
|
8,831
|
(120)
|
|
Leavitt,
Diane R.
|
8,831
|
(120)
|
|
Forman,
Irving
|
8,650
|
(121)
|
|
Spivak,
Bradford
|
8,048
|
(122)
|
|
Spivak,
Daniel
|
8,048
|
(122)
|
|
Spivak,
Jonathon
|
8,048
|
(122)
|
|
Loebell,
David K & Gina W
|
7,630
|
(123)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Diamond
Investments II, LLC(v )
|
7,372
|
(124)
|
|
Phillips
Giraud Naud ET Associes (w)
|
7,084
|
(125)
|
|
Bell,
Joseph D. Jr.
|
7,061
|
(126)
|
|
Puggi,
James A.
|
6,810
|
(127)
|
|
Calandra,
Joseph A.
|
6,712
|
(128)
|
|
Grodko,
Jeffrey
|
6,712
|
(128)
|
|
Shah,
Natwar
|
6,521
|
(129)
|
|
Babcock,
Clint
|
5,649
|
(130)
|
|
Freeman,
Don
|
5,628
|
(131)
|
|
Betanov,
Cemil
|
5,508
|
(132)
|
|
Simkovitz,
Phillip
|
5,437
|
(133)
|
|
Brower,
Lee
|
5,375
|
(134)
|
|
Rutstein,
Larry
|
5,371
|
(135)
|
|
Friedman,
Mark
|
5,034
|
(136)
|
|
Zelman,
Roselyn
|
4,894
|
(137)
|
|
Martino,
Ralph
|
4,666
|
(138)
|
|
DeFranco,
Joseph
|
4,466
|
(139)
|
|
Gable,
Sidney
|
4,324
|
(140)
|
|
Whelden,
Larry
|
4,232
|
(141)
|
|
Hillman,
Todd
|
4,018
|
(142)
|
|
Pena,
Roland
|
3,813
|
(143)
|
|
Feder,
Mark
|
3,656
|
(144)
|
|
Krubiner,
Paul & Marjorie
|
3,481
|
(145)
|
|
Falik,
Harold
|
3,357
|
(146)
|
|
Orlofsky,
Martin Family Trust
|
3,356
|
(147)
|
|
Wenig,
Hal
|
3,356
|
(147)
|
|
Vegh,
Robert
|
3,326
|
(148)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Weiss,
Joseph
|
675
|
(149)
|
|
Sobol,
Tziporah
|
2,684
|
(150)
|
|
Vertical
Ventures (x)
|
2,475
|
(151)
|
|
Simpson,
James
|
2,145
|
(152)
|
|
Wolfe,
Jack
|
2,120
|
(153)
|
|
Campbell,
James V.
|
2,119
|
(154)
|
|
Roberts,
John & Patricia
|
2,114
|
(155)
|
|
Whyte,
Jacqueline
|
2,063
|
(156)
|
|
Grodko,
Philip
|
2,013
|
(157)
|
|
Wilkins,
James
|
1,789
|
(158)
|
|
Blisko,
Larry
|
1,745
|
(159)
|
|
Tamberelli,
Frank
|
1,730
|
(160)
|
|
Mack,
Earl I Charitable Trust (y)
|
1,666
|
(161)
|
|
Orlofsky,
Gary
|
1,611
|
(162)
|
|
Landis,
Deborah
|
1,579
|
(163)
|
|
Landis,
Jennifer
|
1,579
|
(163)
|
|
Landis,
Jonathon
|
1,579
|
(163)
|
|
Berger,
Jerald & Sara
|
1,342
|
(164)
|
|
Ditchek,
Stuart
|
1,342
|
(164)
|
|
Friedman,
Aaron
|
1,342
|
(164)
|
|
Garb,
Eugene
|
1,342
|
(164)
|
|
Gertz,
Anna
|
1,342
|
(164)
|
|
Husarsky,
Leona
|
1,342
|
(164)
|
|
Huszcza,
Joseph
|
1,342
|
(164)
|
|
Katz,
David
|
1,342
|
(164)
|
|
Orlofsky,
Bruce
|
1,342
|
(164)
|
|
Polin,
Milton
|
1,342
|
(164)
|
Number
of Shares of
|
|||
Common
Stock
|
|||
Name
|
Owned
(1)
|
||
Popack,
Israel M.
|
1,342
|
(164)
|
|
Schwartz,
Kenneth
|
1,342
|
(164)
|
|
Waintraub,
Stanley
|
1,342
|
(164)
|
|
Gonosky,
William
|
1,341
|
(165)
|
|
Urbanski,
Patty
|
1,229
|
(166)
|
|
Landis,
Meredith
|
1,079
|
(167)
|
|
PyxisLink
(z)
|
1,000
|
(168)
|
|
Tsougarakis,
Eva
|
550
|
(169)
|
|
Gordon,
Allan H. Esquire
|
337
|
(170)
|
|
Kushner,
Ron
|
337
|
(170)
|
|
Littman,
Leslie
|
337
|
(170)
|
|
Rothbard,
Norman
|
337
|
(170)
|
|
Lemery,
Joan B.
|
337
|
(170)
|
|
SDS
(aa)
|
93
|
(171)
|
|
Total
|
40,641,978
|
(a)
|
Jonathan
Gallen is an investment adviser for, and exercises sole voting and
investment authority with respect to the securities held by, each
of (i)
Ahab Partners, L.P., (ii) Ahab International, Ltd., (iii) Queequeg
Partners, L.P. and (iv) Queequeg, Ltd.
|
(b)
|
Bruce
Miller, general partner of Delphi Partners, Ltd., exercises sole
or shared
voting or dispositive power with respect to the securities held by
Delphi
Partners, Ltd.
|
(c)
|
Alan
Landis, exercises sole or shared voting or dispositive power with
respect
to the securities held by The Landis
Group.
|
(d)
|
Howard
Sorgen, exercises sole or shared voting or dispositive power with
respect
to the securities held by The Sorgen Group.
|
(e)
|
Iris
Yahal, representative of Liraz Systems, exercises sole or shared
voting or
dispositive power with respect to the securities held by Liraz
Systems.
|
(f)
|
Richard
Nager, trustee of Estate of Martin Lustgarten exercises sole or shared
voting or dispositive power with respect to the securities held by
Estate
of Martin Lustgarten.
|
(g)
|
Matthew
Yaakovian exercises sole or shared voting or dispositive power with
respect to the securities held by C. Glen and Joan O. Dugdale
CRT.
|
(h)
|
Glen
Dugdale, trustee of BD Trust, FBO C. Glen Dugdale exercises sole
or shared
voting or dispositive power with respect to the securities held by
BD
Trust FBO C. Glen Dugdale.
|
(i)
|
Thomas
McAuley, Chief Investment Officer of North Sound Legacy, exercises
sole or
shared voting or dispositive power with respect to the securities
held by
North Sound Legacy.
|
(j)
|
Adee
Shafran, representative of Advanced Systems Europe, BV, exercises
sole or
shared voting or dispositive power with respect to the securities
held by
Advanced Systems Europe, BV.
|
(k)
|
John
Haines, representative of Haines Family Associates, LP, exercises
sole or
shared voting or dispositive power with respect to the securities
held by
Haines Family Associates, LP.
|
(l)
|
Sterne
Agee and Leach Inc. Custodian, exercises sole or shared voting or
dispositive power with respect to the securities held by William
R.
Miller, ROTH IRA.
|
(m)
|
John
Haines, exercises sole or shared voting or dispositive power with
respect
to the securities held by Thinkcentric
LLC.
|
(n)
|
John
Lemery, exercises sole or shared voting or dispositive power with
respect
to the securities held by Lemery
Greisler.
|
(o)
|
Jason
Edelman, exercises sole or shared voting or dispositive power with
respect
to the securities held by CGA Resources.
|
(p)
|
Fred
Mack, trustee of 4-30-92 Trust, Fred Mack Trust - Hailey Mack, and
Fred
Mack Trust - Jason Mack, exercises sole or shared voting or dispositive
power with respect to the securities held by 4-30-92 Trust, Fred
Mack
Trust - Hailey Mack, and Fred Mack Trust - Jason
Mack.
|
(q)
|
Christine
Sweet, owner of Amchris Consulting Group, LLC exercises sole or shared
voting or dispositive power with respect to the securities held by
Amchris
Consulting Group, LLC.
|
(r)
|
Doug
Hirsch, general partner of Seneca, exercises sole or shared voting
or
dispositive power with respect to the securities held by
Seneca.
|
(s)
|
Joseph
H. Weiss, exercises sole or shared voting or dispositive power with
respect to the securities held by the Rittenhouse Group and Critical
Mass
Mail.
|
(t)
|
Andrew
P. Schwartz exercises sole or shared voting or dispositive power
with
respect to the securities held by Andrew P. Schwartz Revocable Living
Trust.
|
(u)
|
Hervey
Weitzmen, Trustee of the Blackrock Turnpike Medical Group, exercises
sole
or shared voting or dispositive power with respect to the securities
held
by Blackrock Turnpike Medical
Group.
|
(v)
|
Robert
P. Williams, III Chief Executive Officer of Diamond Investments II,
LLC,
exercises sole or shared voting or dispositive power with respect
to the
securities held by Diamond Investments II,
LLC.
|
(w)
|
Marc
Giruad exercises sole or shared voting or dispositive power with
respect
to the securities held by Phillips Giraud Naud ET
Associes.
|
(x)
|
Joshua
Silverman, representative of Vertical Ventures Investments, LLC,
exercises
sole or shared voting or dispositive power with respect to the securities
held by Vertical Ventures Investments,
LLC.
|
(y)
|
Earle
I. Mack, registered agent for Earle I Mack Charitable Trust A, exercises
sole or shared voting or dispositive power with respect to the securities
held by Earle I Mack Charitable Trust
A.
|
(z)
|
Robin
Pearce, representative of Pyxis Link Corp, exercises sole or shared
voting
or dispositive power with respect to the securities held by Pyxis
Link
Corp.
|
(aa) |
Steve
Derby, General Counsel of SDS Merchant Fund, LP, exercises sole or
shared
voting or dispositive power with respect to the securities held by
SDS
Merchant Fund, LP.
|
(1)
|
The
number of shares of common stock owned by each selling stockholder
includes the aggregate number of shares of common stock which may
be
obtained by each stockholder upon conversion of all of the Series
A1
Preferred Stock owned by the stockholder. It also includes the aggregate
number of shares of common stock that may be obtained upon exercise
of
warrants to purchase common stock owned by such stockholder. The
number of
shares, if any, beneficially owned by each selling stockholder after
each
sale will vary depending upon the terms of the number of such shares
sold.
|
(2)
|
Includes
1,326,136
shares of common stock issuable upon the conversion of Series A-1
Preferred Stock. Also
owns and may offer from time to time under this prospectus 69,322
shares
issuable upon the exercise of warrants. The exercise price of 18,750
warrants is $8 per share of common stock. The exercise price of 50,572
warrants is $10 per share of common stock. Also includes 3,748,155
shares
of common stock. Mr. Landis is the Company’s Chairman of the
Board.
|
(3)
|
Queequeg
Partners, L.P. owns and may offer from time to time under this prospectus
9,643 shares of common stock issuable upon conversion of Series A-1
Preferred Stock. It also owns and may offer from time to time under
this
prospectus 12,761 shares of common stock issuable upon exercise of
warrants. The exercise price of 9,318 warrants is $10 per share,
the
exercise price of 249 warrants is $38 per share, and the exercise
price of
3,194 warrants is $40 per share.
Also includes 4,709,929 shares of common
stock.
|
(4)
|
Owns
and may offer from time to time under this prospectus 14,832 shares
of
common stock issuable upon conversion of Series A-1 Preferred Stock.
Also
owns and may offer from time to time under this prospectus 19,628
shares
of common stock issuable upon exercise of warrants. The exercise
price of
14,332 warrants is $10 per share, the exercise price of 384 warrants
is
$38 per share, and the exercise price of 4,912 warrants is $40 per
share.
Also
includes 3,275,969 shares of common
stock.
|
(5)
|
Owns
and may offer from time to time under this prospectus 1,586,237 shares
of
common stock.
|
(6)
|
Owns
and may offer from time to time under this prospectus 1,557,159 shares
of
common stock.
|
(7)
|
Queequeg
Limited owns and may offer from time to time under this prospectus
5,193
shares of common stock issuable upon conversion of Series A-1 Preferred
Stock. It also owns and may offer from time to time under this prospectus
6,872 shares of common stock issuable upon exercise of warrants.
The
exercise price of 5,018 warrants is $10 per share, the exercise price
of
134 warrants is $38 per share, and the exercise price of 1,720 warrants
is
$40 per share. Also
includes 1,492,873 shares of common
stock.
|
(8)
|
Includes
111,016 shares of common stock issuable upon the conversion of Series
A-1
Preferred Stock. Also owns and may offer from time to time under
this
prospectus 15,274 shares of common stock issuable upon the exercise
of
warrants. The exercise price of 11,667 shares is $10 per share of
common
stock, 901 shares is $17 per share of common stock, and 2,706 shares
exercisable at $20 per share of common stock. Also includes 1,274,951
shares of common stock. Mr. Pizi is the Chief Intelligence officer
of the
Company. Mr.
Pizi also holds 15,000 shares of common stock which may be acquired
upon
the exercise of stock options exercisable within 60 days of this
prospectus, which shares are not being registered for resale by means
of
this prospectus.
|
(9)
|
Ahab
International Ltd. owns and may offer from time to time under this
prospectus 1,120,000 shares of common stock.
|
(10)
|
Owns
and may offer from time to time under this prospectus 1,085,922 shares
of
common stock
|
(11)
|
Owns
and may offer from time to time under this prospectus 1,032,786 shares
of
common stock. Mr. Percelay is a member of the Company’s Board of
Directors.
|
(12)
|
Owns
and may
offer
from time to time under this prospectus 60,688 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also owns
and
may offer
from time to time under this prospectus 12,658 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 944,848 shares of common
stock.
|
(13)
|
Owns
and may
offer
from time to time under this prospectus 20,731 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also owns
and
may offer
from time to time under this prospectus 5,600 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 991,064 shares of common
stock.
|
(14)
|
Owns
and may offer from time to time under this prospectus 49,418 shares
of
common stock issuable upon conversion of Series A-1 Preferred Stock.
Also
owns and may offer from time to time under this prospectus 15,844
shares
of common stock issuable upon exercise of warrants. The exercise
price of
13,195 warrants is $10 per share, the exercise price of 192 warrants
is
$38 per share, and the exercise price of 2,457 warrants is $40 per
share.
Also
includes 907,995 shares of common stock. Mr. Miller is a member of
the
Company’s Board of Directors.
|
(15)
|
Owns
and
may
offer
from time to time under this prospectus 939,034 shares of common
stock.
|
(16)
|
Ahab
Partners, L.P. owns and may offer from time to time under this prospectus
880,000 shares of common stock.
|
(17)
|
Owns
and may
offer
from time to time under this prospectus 802,593 shares of common
stock.
|
(18)
|
Owns
and may
offer
from time to time under this prospectus 778,464 shares of common
stock.
|
(19)
|
Owns
and may offer
from time to time under this prospectus 1,000 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also owns
and
may offer
from time to time under this prospectus 329 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 680,864 shares of common
stock.
|
(20)
|
Owns
and may offer from time to time under this prospectus 26,941 shares
of
common stock issuable upon exercise of warrants. The exercise price
of
8,163 warrants is $7 per share, the exercise price of 16,796 warrants
is
$10 per share, and the exercise price of 1,982 warrants is $20 per
share.
Also includes 532,047 shares of common
stock.
|
(21)
|
Owns
and may offer
from time to time under this prospectus 513,145 shares of common
stock.
|
(22)
|
Delphi
Partners, Ltd.
owns and may offer from time to time under this prospectus 18,000
shares
of common stock issuable upon conversion of Series A-1 Preferred
Stock. It
also owns and may offer from time to time under this prospectus 3,514
shares of common stock issuabl upon exercise of warrants exercisable
at
$10 per share.
Also includes 491,267 shares of common stock.
|
(23)
|
Owns
and may offer
from time to time under this prospectus 6,031 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also owns
450,668 shares of common stock.
|
(24)
|
The
Landis Group owns and may offer
from time to time under this prospectus 402,134 shares of common
stock.
|
(25)
|
The
Sorgen Group owns and may offer
from time to time under this prospectus 376,221 shares of common
stock.
|
(26)
|
Liraz
Systems owns and
may offer
from time to time under this prospectus 40 shares of common stock
issuable
upon conversion of Series A-1 Preferred Stock. Also owns and
may offer
from time to time under this prospectus 1,645 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 361,593 shares of common
stock.
|
(27)
|
Owns
and
may offer
from time to time under this prospectus 658 shares of common stock
issuable upon the exercise of warrants exercisable at $10 per share.
Also
includes 344,021 shares of common
stock.
|
(28)
|
Owns
and ay offer
from time to time under this prospectus 556 shares of common stock
issuable upon the exercise of warrants exercisable at $10 per share.
Also
includes 332,654 shares of common
stock.
|
(29)
|
Owns
and may offer
from time to time under this prospectus 4,224 shares of common stock
issuable upon the exercise of warrants exercisable at $10 per share.
Also
includes 288,931 shares of common
stock.
|
(30)
|
Owns
and
may offer
from time to time under this prospectus 265,870 shares of common
stock.
|
(31)
|
Owns
and may offer
from time to time under this prospectus 278 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 249,655 shares of common
stock.
|
(32)
|
Owns
and may offer
from time to time under this prospectus 249,160 shares of common
stock.
|
(33)
|
Owns
and may offer
from time to time under this prospectus 230,842 shares of common
stock.
|
(34)
|
Owns
and may offer
from time to time under this prospectus 227,300 shares of common
stock.
|
(35)
|
Owns
and may offer
from time to time under this prospectus 400 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 224,577 shares of common
stock.
|
(36)
|
Owns
and may offer from time to time under this prospectus 7,414 shares
of
common stock issuable upon conversion of Series A-1 Preferred Stock.
Also
owns and may offer from time to time under this prospectus 9,811
shares of
common stock issuable upon exercise of warrants. The exercise price
of
7,164 warrants is $10 per share, the exercise price of 192 warrants
is $38
per share, and the exercise price of 2,455 warrants is $40 per share.
Also
includes 194,163 shares of common
stock.
|
(37)
|
Owns
and may offer
from time to time under this prospectus 201,294 shares of common
stock.
|
(38)
|
North
Sound Legacy International, Ltd. owns and may offer from time to
time
under this prospectus 17,488 shares of common stock issuable upon
exercise
of warrants. The exercise price of 4,999 warrants is $7 per share,
the
exercise price of 10,061 warrants is $10 per share, and the exercise
price
of 2,428 warrants is $20 per share. Also
includes 145,333 shares of common
stock.
|
(39)
|
Owns
and may offer
from time to time under this prospectus 250 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 161,937 shares of common
stock.
|
(40)
|
Owns
and may offer
from time to time under this prospectus 160,243 shares of common
stock.
|
(41)
|
Owns
and may offer
from time to time under this prospectus 833 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 153,415 shares of common
stock.
|
(42)
|
Owns
and may offer
from time to time under this prospectus 148,784 shares of common
stock.
Mr. Atherton is a member of the Company’s Board of
Directors.
|
(43)
|
Owns
and may offer
from time to time under this prospectus 141,625 shares of common
stock.
|
(44)
|
Owns
and may offer
from time to time under this prospectus 141,099 shares of common
stock.
|
(45)
|
Owns
and may offer
from time to time under this prospectus 1,154 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 138,886 shares of common
stock.
|
(46)
|
Owns
and may offer
from time to time under this prospectus 136,640 shares of common
stock.
|
(47)
|
Owns
and may offer
from time to time under this prospectus 222 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 120,053 shares of common
stock.
|
(48)
|
Advanced
Systems Europe, B.V. owns and may offer from time to time under this
prospectus 3 shares of common stock issuable upon conversion of Series
A-1
Preferred Stock. Owns
and may offer
from time to time under this prospectus 17,740 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 100,353 shares of common
stock.
|
(49)
|
North
Sound Legacy Institutional Fund, L.L.C. owns and may offer from time
to
time under this prospectus 19,009 shares of common stock issuable
upon
exercise of warrants. The exercise price of 5,776 warrants is $7
per
share, the exercise price of 10,661 warrants is $10 per share, and
the
exercise price of 2,572 warrants is $20 per share. Also
includes 93,583 shares of common
stock.
|
(50)
|
Owns
and may offer from time to time under this prospectus 1,000 shares
of
common stock issuable upon conversion of Series A-1 Preferred Stock.
Also
owns and may offer from time to time under this prospectus 2,623
shares of
common stock issuable upon exercise of warrants exercisable at $10
per
share. Also
includes 107,899 shares of common
stock.
|
(51)
|
Owns
and may offer
from time to time under this prospectus 105,382 shares of common
stock.
|
(52)
|
Owns
and may offer
from time to time under this prospectus 101,914 shares of common
stock.
|
(53)
|
Owns
and may offer
from time to time under this prospectus 100,499 shares of common
stock.
|
(54)
|
Owns
and may offer
from time to time under this prospectus 100,474 shares of common
stock.
|
(55)
|
Owns
and may offer
from time to time under this prospectus 100,000 shares of common
stock.
|
(56)
|
Owns
and may offer
from time to time under this prospectus 96,943 shares of common
stock.
|
(57)
|
Owns
and may offer
from time to time under this prospectus 95,279 shares of common
stock.
|
(58)
|
Owns
and may offer
from time to time under this prospectus 95,251 shares of common
stock.
|
(59)
|
The
Haines Family Associates, L.P. owns and may offer
from time to time under this prospectus 2,000 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also owns
and may
offer from time to time under this prospectus 2,858 shares of common
stock
issuable upon exercise of warrants exercisable at $10 per share.
Also
includes 88,243 shares of common
stock.
|
(60)
|
Owns
and may offer
from time to time under this prospectus 81,527 shares of common
stock.
|
(61)
|
Owns
and may offer
from time to time under this prospectus 80,534 shares of common
stock.
|
(62)
|
Owns
and may offer
from time to time under this prospectus 80,415 shares of common
stock.
|
(63)
|
Owns
and may offer
from time to time under this prospectus 80,349 shares of common
stock.
|
(64)
|
Owns
and may offer
from time to time under this prospectus 80,326 shares of common
stock.
|
(65)
|
Owns
and may offer
from time to time under this prospectus 80,286 shares of common stock.
Mr.
Porciello is a member of the Company’s Board of
Directors.
|
(66)
|
Owns
and may offer
from time to time under this prospectus 67,842 shares of common
stock.
|
(67)
|
Owns
and may offer
from time to time under this prospectus 64,294 shares of common
stock.
|
(68)
|
Owns
and may offer
from time to time under this prospectus 60,829 shares of common
stock.
|
(69)
|
Owns
and may offer
from time to time under this prospectus 50,355 shares of common
stock.
|
(70)
|
Lemery
Griesler, LLC owns
and may offer
from time to time under this prospectus 50,000 shares of common
stock.
|
(71)
|
Owns
and may offer from time to time under this prospectus 6,969 shares
of
common stock issuable upon exercise of warrants. The exercise price
of
2,133 warrants is $7 per share, the exercise price of 4,318 warrants
is
$10 per share, and the exercise price of 518 warrants is $20 per
share.
Also includes 42,554 shares of common
stock.
|
(72)
|
Owns
and may offer
from time to time under this prospectus 48,952 shares of common
stock.
|
(73)
|
Owns
and may offer
from time to time under this prospectus 46,355 shares of common
stock.
|
(74)
|
CGA
Resources, LLC.
owns and may offer
from time to time under this prospectus 45,527 shares of common stock
issuable upon conversion of Series A-1 Preferred
Stock.
|
(75)
|
Owns
and may offer
from time to time under this prospectus 43,365 shares of common
stock.
|
(76)
|
Owns
and may offer
from time to time under this prospectus 41,320 shares of common
stock.
|
(77)
|
Owns
and may offer
from time to time under this prospectus 83 shares of common stock
issuable
upon exercise of warrants exercisable at $10 per share. Also includes
40,791 shares of common stock.
|
(78)
|
Owns
and may offer
from time to time under this prospectus 40,227 shares of common
stock.
|
(79)
|
Owns
and may offer
from time to time under this prospectus 40,207 shares of common
stock.
|
(80)
|
Owns
and may offer
from time to time under this prospectus 40,192 shares of common
stock.
|
(81)
|
Owns
and may offer
from time to time under this prospectus 40,163 shares of common
stock.
|
(82)
|
Owns
and may offer
from time to time under this prospectus 40,153 shares of common
stock.
|
(83)
|
Owns
and may offer
from time to time under this prospectus 39,798 shares of common
stock.
|
(84)
|
Owns
and may offer
from time to time under this prospectus 7,250 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also includes
31,673 shares of common stock.
|
(85)
|
Owns
and may offer
from time to time under this prospectus 37,621 shares of common
stock.
|
(86)
|
Owns
and may offer
from time to time under this prospectus 3,000 shares of common stock
issuable upon the exercise of warrants exercisable at $10 per share.
Also
includes 33,145 shares of common
stock.
|
(87)
|
Owns
and may offer
from time to time under this prospectus 34,967 shares of common
stock.
|
(88)
|
Owns
and may offer
from time to time under this prospectus 34,247 shares of common
stock.
|
(89)
|
Owns
and may offer
from time to time under this prospectus 32,652 shares of common stock.
Mr.
Hasenyager, who is a member of the Company’s Board of Directors,
also
holds 1,000 shares of common stock which may be acquired upon the
exercise
of stock options exercisable within 60 days of this prospectus, which
shares are not being registered for resale by means of this
prospectus.
|
(90)
|
Seneca
Capital International owns and may offer
from time to time under this prospectus 24,430 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also includes
7,818 shares of common stock issuable upon exercise of warrants at
$40 per
share.
|
(91)
|
Owns
and may offer
from time to time under this prospectus 28,675 shares of common
stock.
|
(92)
|
Owns
and may offer
from time to time under this prospectus 28,291 shares of common
stock.
|
(93)
|
Owns
and may offer
from time to time under this prospectus 27,803 shares of common
stock.
|
(94)
|
Seneca
Capital L.P. owns and may offer
from time to time under this prospectus 17,556 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Includes
5,540
shares of common stock issuable upon exercise of warrants at $40
per
share. Also includes 2,702 shares of common
stock.
|
(95)
|
The
Rittenhouse Group, aka Critical Mass Mail owns and may offer
from time to time under this prospectus 24,793 shares of common
stock.
|
(96)
|
Owns
and may offer
from time to time under this prospectus 24,105 shares of common
stock.
|
(97)
|
Owns
and may offer
from time to time under this prospectus 20,845 shares of common
stock.
|
(98)
|
Owns
and may offer
from time to time under this prospectus 20,089 shares of common
stock.
|
(99)
|
Owns
and may offer
from time to time under this prospectus 1,500 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also includes
17,989 shares of common stock.
|
(100)
|
Owns
and may offer
from time to time under this prospectus 18,243 shares of common
stock
|
(101)
|
Owns
and may offer
from time to time under this prospectus 10,938 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
and may offer
from time to time under this prospectus 781 warrants exercisable
at $32
per share. Includes 5,299 shares of common
stock.
|
(102)
|
Owns
and may offer
from time to time under this prospectus 10,938 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
and may offer
from time to time under this prospectus 781 shares of common stock
issuable upon exercise of warrants exercisable at $32 per share.
Includes
5,266 shares of common stock.
|
(103)
|
Owns
and may offer
from time to time under this prospectus 16,076 shares of common
stock.
|
(104)
|
Owns
and may offer
from time to time under this prospectus 16,066 shares of common
stock.
|
(105)
|
Owns
and may offer
from time to time under this prospectus 3,248 shares of common stock.
Mr.
Broderick, who is the Company’s Chief Executor Officer and Chief Financial
Officer also
holds 12,609 shares of common stock which may be acquired upon the
exercise of stock options exercisable within 60 days of this prospectus,
which shares are not being registered for resale by means of this
prospectus.
|
(106)
|
Owns
and may offer
from time to time under this prospectus 15,555 shares of common
stock.
|
(107)
|
Owns
and may offer
from time to time under this prospectus 14,138 shares of common
stock.
|
(108)
|
Owns
and may offer
from time to time under this prospectus 14,125 shares of common
stock.
|
(109)
|
Owns
and may offer
from time to time under this prospectus 14,118 shares of common
stock.
|
(110)
|
Owns
and may offer
from time to time under this prospectus 14,090 shares of common
stock.
|
(111)
|
Owns
and may offer
from time to time under this prospectus 13,699 shares of common
stock.
|
(112)
|
Owns
and may offer
from time to time under this prospectus 13,440 shares of common
stock.
|
(113)
|
Owns
and may offer
from time to time under this prospectus 13,434 shares of common
stock.
|
(114)
|
Owns
and may offer
from time to time under this prospectus 13,422 shares of common
stock.
|
(115)
|
Owns
and may offer
from time to time under this prospectus 12,363 shares of common
stock.
|
(116)
|
Owns
and may offer
from time to time under this prospectus 12,054 shares of common
stock.
|
(117)
|
Owns
and may offer
from time to time under this prospectus 3,250 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
and may offer
from time to time under this prospectus 800 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Includes
7,449 shares of common stock.
|
(118)
|
Owns
and may offer
from time to time under this prospectus 10,741 shares of common
stock.
|
(119)
|
Owns
and may offer
from time to time under this prospectus 1,600 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
and may offer
from time to time under this prospectus 793 shares of common stock
issuable upon exercise of warrants exercisable at $10 per share.
Includes
7,042 shares of common stock.
|
(120)
|
Owns
and may offer
from time to time under this prospectus 8,831 shares of common
stock.
|
(121)
|
Owns
and may offer
from time to time under this prospectus 2,000 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also includes
6,650 shares of common stock.
|
(122)
|
Owns
and may offer
from time to time under this prospectus 8,048 shares of common
stock.
|
(123)
|
Owns
and may offer
from time to time under this prospectus 7,630 shares of common
stock.
|
(124)
|
Owns
and may offer
from time to time under this prospectus 7,372 shares of common
stock.
|
(125)
|
Phillips
Giraud Naud ET Associes owns and may offer from time to time under
this
prospectus 7,084 shares of common
stock.
|
(126)
|
Owns
and may offer
from time to time under this prospectus 7,061 shares of common
stock.
|
(127)
|
Owns
and may offer
from time to time under this prospectus 4,375 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
and may offer
from time to time under this prospectus 313 shares of common stock
issuable upon exercise of warrants exercisable at $32 per share.
Includes
2,122 shares of common stock.
|
(128)
|
Owns
and may offer
from time to time under this prospectus 6,712 shares of common
stock.
|
(129)
|
Owns
and may offer
from time to time under this prospectus 5,600 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
and may offer
from time to time under this prospectus 921 shares of common stock
issuable upon exercise of warrants exercisable at $38 per share.
|
(130)
|
Owns
and may offer
from time to time under this prospectus 5,649 shares of common
stock.
|
(131)
|
Owns
and may offer
from time to time under this prospectus 5,628 shares of common
stock.
|
(132)
|
Owns
and may offer
from time to time under this prospectus 5,508 shares of common
stock.
|
(133)
|
Owns
and may offer
from time to time under this prospectus 5,437 shares of common
stock.
|
(134)
|
Owns
and may offer
from time to time under this prospectus 5,375 shares of common
stock.
|
(135)
|
Owns
and may offer
from time to time under this prospectus 676 shares of common stock
issuable upon exercise of warrants at an exercise price of $10 per
share.
Also owns 4,695 shares of common
stock.
|
(136)
|
Owns
and may offer
from time to time under this prospectus 676 shares of common stock
issuable upon exercise of warrants at an exercise price of $10 per
share.
Also owns 4,358 shares of common
stock.
|
(137)
|
Owns
and may offer
from time to time under this prospectus 4,894 shares of common
stock.
|
(138)
|
Owns
and may offer
from time to time under this prospectus 4,666 shares of common
stock.
|
(139)
|
Owns
and may offer
from time to time under this prospectus 4,466 shares of common
stock.
|
(140)
|
Owns
and may offer
from time to time under this prospectus 1,000 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
3,324
shares of common stock.
|
(141)
|
Owns
and may offer
from time to time under this prospectus 4,232 shares of common
stock.
|
(142)
|
Owns
and may offer
from time to time under this prospectus 4,018 shares of common
stock.
|
(143)
|
Owns
and may offer
from time to time under this prospectus 3,813 shares of common
stock.
|
(144)
|
Owns
and may offer
from time to time under this prospectus 329 shares of common stock
issuable upon exercise of warrants at an exercise price of $10 per
share.
Also owns 3,327 shares of common
stock.
|
(145)
|
Owns
and may offer
from time to time under this prospectus 3,481 shares of common
stock.
|
(146)
|
Owns
and may offer
from time to time under this prospectus 3,357 shares of common
stock.
|
(147)
|
Owns
and may offer
from time to time under this prospectus 3,356 shares of common
stock.
|
(148)
|
Owns
and may offer
from time to time under this prospectus 3,326 shares of common
stock.
|
(149)
|
Owns
and may offer
from time to time under this prospectus 675 shares of common
stock.
|
(150)
|
Owns
and may offer
from time to time under this prospectus 2,684 shares of common
stock.
|
(151)
|
Vertical
Ventures owns and may offer
from time to time under this prospectus, 2,475 shares of common stock
issuable upon exercise of warrants. The exercise price of 1,767 warrants
is $7 per share and the exercise price of 708 warrants is $20 per
share.
|
(152)
|
Owns
and may offer
from time to time under this prospectus 2,145 shares of common
stock.
|
(153)
|
Owns
and may offer
from time to time under this prospectus 2,120 shares of common
stock.
|
(154)
|
Owns
and may offer
from time to time under this prospectus 2,119 shares of common
stock.
|
(155)
|
Owns
and may offer
from time to time under this prospectus 2,114 shares of common
stock.
|
(156)
|
Owns
and may offer
from time to time under this prospectus 2,063 shares of common
stock.
|
(157)
|
Owns
and may offer
from time to time under this prospectus 2,013 shares of common
stock.
|
(158)
|
Owns
and may offer
from time to time under this prospectus 1,789 shares of common
stock.
|
(159)
|
Owns
and may offer
from time to time under this prospectus 1,745 shares of common
stock.
|
(160)
|
Owns
and may offer
from time to time under this prospectus 400 shares of common stock
issuable upon conversion of Series A-1 Preferred Stock. Also
owns
1,330
shares of common stock.
|
(161)
|
Owns
and may offer
from time to time under this prospectus 1,666 shares of common
stock.
|
(162)
|
Owns
and may offer
from time to time under this prospectus 1,611 shares of common
stock.
|
(163)
|
Owns
and may offer
from time to time under this prospectus 1,579 shares of common
stock.
|
(164)
|
Owns
and may offer
from time to time under this prospectus 1,342 shares of common
stock.
|
(165)
|
Owns
and may offer
from time to time under this prospectus 1,341 shares of common
stock.
|
(166)
|
Owns
and may offer
from time to time under this prospectus 1,229 shares of common
stock.
|
(167)
|
Owns
and may offer
from time to time under this prospectus 1,079 shares of common
stock.
|
(168)
|
Owns
and may offer
from time to time under this prospectus 1,000 shares of common stock
issuable upon exercise of warrants at an exercise price of $38 per
share.
|
(169)
|
Owns
and may offer
from time to time under this prospectus 550 shares of common
stock.
|
(170)
|
Owns
and may offer
from time to time under this prospectus 337 shares of common
stock.
|
(171)
|
Owns
and may offer
from time to time under this prospectus 93 shares of common stock
issuable
upon exercise of warrants at an exercise price of $7 per
share.
|
·
|
the
name of each such selling stockholder and of the participating
broker-dealer(s);
|
·
|
the
number of shares involved;
|
·
|
the
initial price at which such shares were
sold;
|
·
|
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where
applicable;
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify
the
information set out or incorporated by reference in this prospectus;
and
|
·
|
other
facts material to the transactions.
|
Year
Ended December 31,
(in
thousands, except per share data)
|
||||||||||||||||
2002
|
2003
|
2004
|
2005
|
2006
|
||||||||||||
SELECTED
STATEMENT OF OPERATIONS DATA
|
||||||||||||||||
Revenue
|
$
|
3,101
|
$
|
530
|
$
|
775
|
$
|
785
|
$
|
972
|
||||||
Loss
from continuing operations
|
$
|
(13,142
|
)
|
$
|
(9,874
|
)
|
$
|
(9,731
|
)
|
$
|
(3,681
|
)
|
$
|
(2,997
|
)
|
|
Loss
from continuing operations per common share - basic and
diluted
|
$
|
(74.89
|
)
|
$
|
(54.00
|
)
|
$
|
(27.05
|
)
|
$
|
(8.27
|
)
|
$
|
(0.25
|
)
|
|
Weighted
average common and common equivalent shares outstanding- basic and
diluted
|
189
|
215
|
360
|
445
|
35,182
|
December
31,
|
||||||||||||||||
2002
|
2003
|
2004
|
2005
|
2006
|
||||||||||||
SELECTED
BALANCE SHEET DATA
|
||||||||||||||||
Working
capital (deficiency)
|
$
|
(6,254
|
)
|
$
|
(6,555
|
)
|
$
|
(10,255
|
)
|
$
|
(13,894
|
)
|
$
|
(7,894
|
)
|
|
Total
assets
|
11,852
|
5,362
|
530
|
241
|
597
|
|||||||||||
Long-term
debt, including current maturities
|
2,893
|
2,756
|
5,444
|
7,931
|
2,932
|
|||||||||||
Senior
convertible redeemable preferred stock
|
--
|
3,355
|
1,367
|
1,061
|
--
|
|||||||||||
Stockholders'
equity (deficiency)
|
1,653
|
(6,103
|
)
|
(11,857
|
)
|
(15,076
|
)
|
(7,912
|
)
|
·
|
Provided
our Board of Directors with discretionary authority, pursuant to
the plan
of recapitalization to effect a reverse stock at a ratio of 20:1
to 100:1,
and on November 20, 2006 our Board of Directors fixed the ratio at
100:1;
|
·
|
Changed
the name of the Company from Level 8 Systems, Inc. to Cicero
Inc.;
|
·
|
Increased
the authorized common stock of the Company from 85 million shares
to 215
million shares;
|
·
|
Converted
existing preferred shares into a new Series A-1 Preferred
Stock;
|
·
|
Converted
and cancelled senior reorganization debt in the aggregate principal
amount
of $2.3 million into 3,438,473 shares of common stock;
|
·
|
Converted
the aggregate principal amount of $3.9 million of convertible bridge
notes
into 30,508,448 shares of our common
stock;
|
·
|
Converted
each share of Series A3 Preferred Stock into 4.489 shares of Series
A-1
Preferred Stock;
|
·
|
Converted
each share of Series B3 Preferred Stock into 75 shares of Series
A-1
Preferred Stock;
|
·
|
Converted
each share of Series C Preferred Stock into 39.64 shares of Series
A-1
Preferred Stock;
|
·
|
Converted
an aggregate principal amount of $1,060,562 of Series D Preferred
Stock,
recorded as mezzanine financing, into 53 Preferred Stock;
and
|
·
|
Converted
an aggregate principal amount of $992,000 of convertible promissory
notes
into 1,591 shares of Series A-1 Preferred
Stock.
|
·
|
Long
Average Call Handling Time.
Currently, most customer contact centers use several applications
requiring the CSR to ask customers for account and telephone information,
navigate between applications, and to retype customer information
in
several screens. This increases the overall call handling time and
decreases customer satisfaction. In addition, many contact centers
require
multiple transfers to different agents to deal with diverse customer
service issues. A one-call, one-contact system reduces average call
handling time and enhances customer service by avoiding these multiple
transfers. Ideally, the customer service representative provides
the
call-in customer with multi-channel customer interfaces with timely
access
to all information that the customer needs. Reducing average call
handling
time and increasing customer service and customer intimacy are some
of the
primary metrics on which contact centers are evaluated by management.
Improving customer service through simplified processes and having
access
to additional information in an integrated environment also provides
opportunities to cross-sell other
products.
|
·
|
Training
and Turnover of Contact Center Staff.
The contact center industry is characterized by high training costs,
operational complexity, continuous turnover and increasing costs
per call.
These difficulties stem from increased customer expectations, the
ever-increasing complexity and diversity of the business applications
used
by customer service representatives, and pressure to decrease training
time and increase the return on investment in customer service
representatives.
|
·
|
Industry
Consolidation.
Many industries in our target market, including the financial services
industry, are in a constant state of consolidation. When companies
consolidate through mergers and acquisitions, the customer contact
centers
are generally merged to lower overall costs and to reduce redundancies.
This consolidation generally leads to re-training and the use of
multiple
applications handling similar functions that can be quite difficult
to
integrate successfully.
|
·
|
Integrated
End-User Environment.
The end-user can navigate any number of applications, whether local,
client-server, mainframe legacy or web-browser, from a single environment
with a consistent look and feel. Cicero® software integrates the execution
and functionality of a variety of custom or packaged Windows-based
applications. If a software product is designed to provide output
into a
Windows environment, Cicero® can subordinate its presentation and control
it through the Cicero environment. Cicero® software can guide the user by
providing assistance in tasks consisting of multiple steps, and make
additional information accessible without any extra effort on the
user’s
part.
|
·
|
Information
Center.
The optional Information Center is a customizable hub of critical
information that facilitates the effective execution of processes
and
minimizes the need to enter frequently accessed information repeatedly.
The Information Center is a composite application and a subset of
the
Cicero Graphical User Interface Manager, and provides a configurable
information hub to enable end-users to interact with selected applications
on a continuous basis and access real-time information. The Information
Center is frequently used to support incoming message alerts, scrolling
headlines, key operational statistics, interaction with integrated
voice
response systems and real-time video. Any information that is
time-sensitive or actionable can be displayed side-by-side with the
currently selected application page and information can be readily
exchanged between the optional Information Center and other
applications.
|
·
|
Context
Sharing.
Cicero® software’s unique, patented technology enables the right
information in any workstation application to be shared with the
other
applications that need it. Cicero® software’s Context-Sharing Manager
within the Cicero Application Bus largely eliminates the need for
re-keying customer data, simplifies customer information updates,
and
reduces errors and re-work. It also allows one subordinated application
to
perform processing based on a change in another application, thus
causing
applications to work together without end-user
intervention.
|
·
|
Advanced
Integration Architecture.
Cicero® software is a sophisticated application integration platform that
subordinates and controls and non-invasively integrates any applications
with a light “footprint” in the Windows environment. The Cicero®
software’s publish and subscribe bus architecture provides for efficient
inter-application communication. Its event management capabilities
allow
applications to respond to events that occur within unrelated
applications, making the integration more responsive. Cicero® software
extends the usefulness and life span of legacy architectures and
provides
a common architecture for events across all platforms. Applications
are
integrated using Cicero Studio, a visual integration tool within
the
Cicero® software product which allows applications to be quickly
integrated. Integrators are not required to understand the details
of the
underlying technology when integrating an application. Cicero® software
also supports open platform architecture for communication and
interoperability, native scripting languages and XML. Cicero® software is
designed to be extendible, allowing extensions to new environments
by
using well-defined plug-ins or connectors. Cicero® software can also
present components or elements of integration as web services and
incoming
web services requests can initiate Cicero® software processes without
requiring any action by a user.
|
·
|
Management
Tools.
Comprehensive tools are built into the system for version management,
automatic component updates and user preference configuration. Remote
control and diagnostic tools are integrated to provide off-site help
desk
and troubleshooting personnel with access to assist them in their
support
duties. In addition, built-in trace and history mechanisms allow
user’s
management to obtain operational information that can detail users’
activities or point out operational problems. Furthermore, Cicero®
software can enforce steps to be performed in a particular order,
if
needed, so as to enforce conformance with regulations, such as HIPAA,
across multiple applications, or when an older, non-conformant application
needs to be used in such an
environment.
|
·
|
Lower
Average Cost Per Call and Average Call Time.
Because Cicero® presents users with a single interface through which
applications are accessed, it eliminates the need to navigate through
and
between applications.
|
·
|
Reduce
Staff Cost.
Cicero® software can reduce staff cost in two ways. First, by increasing
the efficiency of each customer service representative, a contact
center
can handle the same volume of customer service requests with a smaller
staff. Secondly, training costs and time can be reduced, placing
newly
hired staff into productive positions faster than other contract
center
applications.
|
·
|
Increase
Cross-Selling Efficiency.
The consolidation of all customer data and customer specific applications
can increase the efficiency of cross-selling of products and services.
For
instance, a Cicero® enabled contact center might be configured to inform
the customer service representatives that the customer, while a brokerage
services customer, does not use bill paying or other offered services.
On
the other hand, Cicero® software can help prevent customer service
representatives from selling a product that is inappropriate for
that
customer or a product or service that the customer already has. Increasing
the efficiency of cross-selling can both increase revenues and avoid
customer dissatisfaction.
|
·
|
Deliver
Best in Class Customer Service.
Increasing customer service is one of the primary methods by which
a
company in highly competitive customer focused industries such as
financial services can differentiate itself from its competition.
By
increasing the efficiency of its customer service representatives,
decreasing average time per call and increasing effective cross-selling,
the Cicero-enabled contact center presents its customers with a more
intimate and satisfying customer service experience that can aid
in both
customer retention and as a differentiator for customer acquisition.
The
access to multiple platforms through one user-friendly interface
also
improves the experience of the customer service representative, leading
to
improved customer service representative morale and
productivity.
|
·
|
Preserve
Existing Information Technology Investment.
Cicero® software integrates applications at the desktop level, which
allows better use of existing custom designed applications and divergent
computing platforms (e.g., midrange, client/server, LAN and Web),
which
are not readily compatible with each other or with legacy mainframe
systems. Linking together the newer computing applications to existing
systems helps preserve and increase the return on the investments
made by
organizations in their information technology
systems.
|
·
|
Support
a Broad Range of Applications, Platforms and
Standards.
The IT departments of larger enterprises need solutions to integrate
a
broad array of applications and platforms using a wide variety of
industry
standards such as BPEL and Service-Oriented Architecture. The Cicero®
software solution provides visual application integration solutions
that
support common industry standards and can handle a wide array of
disparate
applications and data types while operating on a Windows NT, Windows
XP or
Windows 2000 platforms. The Cicero® software solution can be used to link
custom or packaged applications together regardless of the tools
or
programming language used to create the application by integrating
those
applications at the desktop level.
|
·
|
Ease
of Implementation and Enhanced Information Technology
Productivity.
The Cicero® software solution allows customers to create comprehensive
data transformation and information exchange solutions without the
need
for custom coding. Our products provide pre-built adapters for a
wide
variety of systems that are pre-programmed for transforming data
into the
format required by that system and transporting it using the appropriate
transport mechanism. This greatly simplifies and speeds implementation
of
new solutions into the deployed Cicero framework. For instance, while
in
operation at Merrill Lynch, Cicero® was updated to include software for
Siebel Systems over a period of only two days when Merrill Lynch
decided
to implement the Siebel Systems solution. The Cicero® software solution
allows users to rapidly integrate new and existing applications with
little or no customization
required.
|
·
|
Expand
into Our Target Markets.
Our short-term goal is to gain a presence in contact centers, such
as in
the financial services industry with the Cicero® software solution. The
financial services industry is ideal for Cicero® because each entity has a
large base of installed users that use the same general groups of
applications. However, Cicero® software can be used in any industry that
needs to integrate applications and processes, such as the
telecommunications and insurance industries. Additionally, we believe
that
state and local governments, first responders, intelligence and defense
agencies are excellent target markets for integration of legacy
applications. Since the beginning of 2005, we entered into an agreement
to
install Cicero software throughout N.E.W. Customer Service Companies,
a
contact center outsourcing company, to shorten call times, improve
agent
efficiency and improve customer satisfaction. We have recently deployed
our software to Merrill Lynch’s International Wealth Management brokers.
In addition, we have licensed Cicero software to the U.S. Department
of
Agriculture and the West Windsor Township, New Jersey Police Department.
The latter agency is deploying Cicero in their Public Safety Answering
Point. In this environment, Cicero® software will allow for fast and
accurate retrieval of National Crime Information Center (NCIC) wanted
person and related information, Interstate Identification Index,
and
National Law Enforcement Telecommunications systems, as well as various
state criminal history and warrant data bases, motor vehicle records,
and
local arrest records.
|
·
|
Develop
Strategic Partnerships.
The critical success factor for customers implementing Customer
Relationship Management (CRM) solutions in their contact centers
is to
have the right balance of technology and service provision. Similarly,
penetration into the government market requires alliances with proven
government system integrators and suppliers. To supplement our direct
dales efforts, are implementing a tightly focused strategic teaming
approach with a selected group of well-known consultancy and systems
integration firms that specialize in financial services, government
and
eCRM integrated solutions. Since announcing the general availability
of
Cicero® 6.0 in May 2004, we have entered into strategic partnerships with
the following system integrators/resellers, for integrated business
solutions: ThinkCentric, Hewlett Packard andHouse of Code. In addition,
we
have entered into strategic partnerships with Silent Systems, Inc.
(a
consultancy and reselling organization), ADPI LLC (a consultancy
and
reseller organization), and Pilar Services, Inc. (a government focused
integrator and reseller). The Company has no material dependency
on any of
these organizations, but rather looks to build upon these relationships
as
additional outlets for its products. Leveraging these organizations,
who
will provide such integration services as architecture planning,
technology integration and business workflow improvement, allows
us to
focus on core application system needs and how Cicero® best addresses
them, while our partners will surround the technology with appropriate
industry and business knowledge.
|
·
|
Leverage
Our In-House Expertise in the Cicero® Software.
Merrill Lynch originally developed Cicero® internally for use by
approximately 30,000 professionals worldwide. To approach the market
from
a position of strength, we have added members of the Merrill Lynch
development team to our Cicero® development team. We recruited and hired
Anthony Pizi, First Vice President and Chief Technology Officer of
Merrill
Lynch’s Private Technology’s Architecture and Service Quality Group, and
the Cicero® project director as our Chief Executive Officer and Chief
Technology Officer (currently Chief Information Officer) as well
as
several of the primary Cicero® engineers from Merrill Lynch to support our
ongoing Cicero® development
efforts.
|
·
|
Utilize
Market Analyses to Demonstrate Tangible Return-On-Investment
results.
Most contact centers benchmark their operational and services levels
against established industry norms. Metrics such as average waiting
time
in the call queue, call abandonment rates, after call service work
and
percentage of one-call completion are typically measured against
norms and
trends. We believe that use of Cicero® will provide tangible, demonstrable
improvements to these metrics. In addition, Cicero® technology can
integrate applications and processes more efficiently than other
competing
solutions. This reduces costs to customers and provides a faster
return on
investment than competing products.
|
·
|
Augment
our product line with complementary product offerings.
In this area, we use three strategies. The first is to acquire, when
possible, complementary products that can be sold on their own and
can
also complement the Cicero® software product offering. In furtherance of
such strategy, we have acquired the Ensuredmail
|
·
|
Business
Process Outsourcers
-
use our Cicero® solution in contact centers to provide real time
integration among existing back-office systems, eliminate redundant
data
entry, shorten call times, provide real-time data access and enhance
customer service and service
levels.
|
·
|
A
financial institution
-
uses our Cicero® solution to provide real-time integration among market
data, customer account information, existing back-office systems
and other
legacy applications, eliminate redundant data entry, provide real-time
data access and processing, and enhance customer service and service
levels.
|
·
|
An
insurance company
-
uses our Cicero® solution to integrate their customer information systems
with over thirty software applications including a CRM
application.
|
·
|
A
law enforcement organization
-
uses our Cicero® solution to streamline and automate support for arrests
and investigations while merging federal, state and local systems
within a
unified process.
|
·
|
Product
functionality and features;
|
·
|
Availability
and quality of support services;
|
·
|
Ease
of product implementation;
|
·
|
Price;
|
·
|
Product
reputation; and
|
·
|
Our
financial stability.
|
·
|
Portal
software offers the ability to aggregate information at a single
point,
but not the ability to integrate transactions from a myriad of information
systems on the desktop. Plumtree is a representative company in the
market.
|
·
|
Middleware
software provides integration of applications through messages and
data
exchange implemented typically in the middle tier of the application
architecture. This approach requires modification of the application
source code and substantial infrastructure investments and operational
expense. Reuters, TIBCO and IBM MQSeries are competitors in the middleware
market.
|
·
|
CRM
software offers application tools that allow developers to build
product
specific interfaces and custom applications. This approach is not
designed
to be product neutral and is often dependent on deep integration
with our
technology. Siebel is a representative product in the CRM software
category.
|
·
|
Recently,
there have been several companies that offer capabilities similar
to our
Cicero software in that these companies advertise that they integrate
applications without modifying the underlying code for those applications.
OpenSpan is one company who advertises that they can non-invasively
integrate at the point of contact or on the
desktop.
|
Year
Ended December 31,
|
||||||||||
2006
|
|
2005
|
|
2004
|
||||||
Revenue:
|
||||||||||
Software
|
21.4
|
%
|
51.9
|
%
|
30.8
|
%
|
||||
Maintenance
|
12.3
|
%
|
18.7
|
%
|
39.5
|
%
|
||||
Services
|
66.3
|
%
|
29.4
|
%
|
29.7
|
%
|
||||
Total
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||
Cost
of revenue:
|
||||||||||
Software
|
0.9
|
%
|
2.0
|
%
|
577.8
|
%
|
||||
Maintenance
|
21.8
|
%
|
44.6
|
%
|
49.3
|
%
|
||||
Services
|
56.2
|
%
|
104.7
|
%
|
131.0
|
%
|
||||
Total
|
78.9
|
%
|
151.3
|
%
|
758.1
|
%
|
||||
Gross
margin (loss)
|
21.1
|
%
|
(51.3
|
)%
|
(658.1
|
)%
|
Operating
expenses:
|
||||||||||
Sales
and marketing
|
35.6
|
%
|
79.9
|
%
|
140.4
|
%
|
||||
Research
and product development
|
54.8
|
%
|
113.5
|
%
|
143.3
|
%
|
||||
General
and administrative
|
124.1
|
%
|
144.8
|
%
|
196.4
|
%
|
||||
Impairment
of intangible assets
|
0.0
|
%
|
0.0
|
%
|
75.7
|
%
|
||||
(Gain)
on disposal of assets
|
(2.5
|
)%
|
0.0
|
%
|
(0.6
|
)%
|
||||
Total
|
212.0
|
%
|
338.2
|
%
|
555.2
|
%
|
||||
Loss
from operations
|
(190.9
|
)%
|
(389.5
|
)%
|
(1,213.3
|
)%
|
||||
Other
(expense), net
|
(117.5
|
)%
|
(79.4
|
)%
|
(42.3
|
)%
|
||||
Loss
before taxes
|
(308.4
|
)%
|
(468.9
|
)%
|
(1,255.6
|
)%
|
||||
Income
tax provision (benefit)
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||
Loss
from continuing operations
|
(308.4
|
)%
|
(468.9
|
)%
|
(1,255.6
|
)%
|
||||
Loss
from discontinued operations
|
0.0
|
%
|
0.0
|
%
|
(3.9
|
)%
|
||||
Net
loss
|
(308.4
|
)%
|
(468.9
|
)%
|
(1,259.5
|
)%
|
2006
|
2005
|
2004
|
||||||||
United
States
|
100
|
%
|
100
|
%
|
98
|
%
|
||||
Europe
|
--
|
--
|
2
|
%
|
||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
For
the year ended December 31,
|
||||||||||||||||||||||||||||
2006
|
2005
|
2004
|
||||||||||||||||||||||||||
Desktop
Integration
|
Messaging
and Application Engineering
|
Total
|
Desktop
Integration
|
Messaging
and Application Engineering
|
Total
|
Desktop
Integration
|
Messaging
and Application Engineering
|
Total
|
||||||||||||||||||||
Total
revenue
|
$
|
965
|
$
|
7
|
$
|
972
|
$
|
760
|
$
|
25
|
$
|
785
|
$
|
707
|
$
|
68
|
$
|
775
|
||||||||||
Total
cost of revenue
|
767
|
--
|
767
|
1,188
|
--
|
1,188
|
5,662
|
213
|
5,875
|
|||||||||||||||||||
Gross
margin (loss)
|
198
|
7
|
205
|
(428
|
)
|
25
|
(403
|
)
|
(4,955
|
)
|
(145
|
)
|
(5,100
|
)
|
||||||||||||||
Total
operating expenses
|
1,964
|
121
|
2,085
|
2,536
|
119
|
2,655
|
3,348
|
373
|
3,721
|
|||||||||||||||||||
Segment
profitability (loss)
|
$
|
(1,766
|
)
|
$
|
(114
|
)
|
$
|
(1,880
|
)
|
$
|
(2,964
|
)
|
$
|
(94
|
)
|
$
|
(3,058
|
)
|
$
|
(8,303
|
)
|
$
|
(518
|
)
|
$
|
(8,821
|
)
|
2006
|
2005
|
2004
|
||||||||
Segment
operating expenses
|
$
|
2,085
|
$
|
2,655
|
$
|
3,721
|
||||
Write-off
of intangible assets
|
--
|
--
|
587
|
|||||||
(Gain)
on disposal of assets
|
(24
|
)
|
--
|
(5
|
)
|
|||||
Total
operating expenses
|
$
|
2,061
|
$
|
2,655
|
$
|
4,303
|
2006
|
2005
|
2004
|
||||||||
Total
segment profitability (loss)
|
$
|
(1,880
|
)
|
$
|
(3,058
|
)
|
$
|
(8,821
|
)
|
|
Write-off
of intangible assets
|
--
|
--
|
(587
|
)
|
||||||
Gain
on disposal of assets
|
24
|
--
|
5
|
|||||||
Interest
and other income/(expense), net
|
(1,141
|
)
|
(623
|
)
|
(328
|
)
|
||||
Net
loss before provision for income taxes
|
$
|
(2,997
|
)
|
$
|
(3,681
|
)
|
$
|
(9,731
|
)
|
2007
|
2008
|
2009
|
2010
|
Total
|
||||||||||||
Short
and long-term debt, including interest payments
|
$
|
3,212
|
$
|
31
|
$
|
--
|
$
|
--
|
$
|
3,243
|
||||||
Service
purchase commitments
|
275
|
--
|
--
|
--
|
275
|
|||||||||||
Operating
leases
|
65
|
6
|
--
|
--
|
71
|
|||||||||||
Capital
leases
|
2
|
1
|
--
|
--
|
3
|
|||||||||||
Total
|
$
|
3,554
|
$
|
38
|
$
|
--
|
$
|
--
|
$
|
3,592
|
Name
|
Age
|
Position(s)
|
John
Broderick
|
57
|
Chief
Executive Officer and Chief Financial Officer
|
Anthony
C. Pizi
|
47
|
Director
and Chief Information Officer
|
Mark
Landis
|
65
|
Director
|
Bruce
W. Hasenyager
|
65
|
Director
|
Jay
R. Kingley
|
45
|
Director
|
Charles
B. Porciello
|
71
|
Director
|
Bruce
D. Miller
|
56
|
Director
|
Bruce
A. Percelay
|
51
|
Director
|
John
W. Atherton
|
64
|
Director
|
Name
and Principal
Position
|
Fiscal
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-
Equity Incentive Plan Compensation
|
|
Nonqualified
Deferred Compensation Earnings
|
|
All
Other Compensation
|
|
Total
|
|||||||||||
Anthony
C. Pizi
Chief
Information Officer
|
2006
2005
2004
|
$
$
$
|
150,000
150,000
200,000
|
(1)
(2)
(3)
|
$
$
$
|
--
--
--
|
--
--
--
|
---
--
5,000
|
--
--
--
|
--
--
--
|
$
$
$
|
--
--
--
|
$
$
$
|
150,000
150,000
200,000
|
||||||||||||||
John
P. Broderick
Chief
Executive Officer
Chief
Financial Officer,
Corporate
Secretary
|
2006
2005
2004
|
$
$
$
|
150,000
150,000
200,000
|
(4)
(5)
(6)
|
$
$
$
|
--
--
60,000
|
--
--
--
|
--
--
5,000
|
--
--
--
|
--
--
--
|
$
$
$
|
--
--
--
|
$
$
$
|
150,000
150,000
200,000
|
(1)
|
Mr.
Pizi’s base salary for fiscal 2006 was $150,000. As of December 31, 2006,
Mr. Pizi is owed approximately $94,935 of deferred salary and $100,000
of
his earned bonus from 2003.
|
(2)
|
Mr.
Pizi’s base salary for fiscal 2005 was $200,000. Mr. Pizi had voluntarily
elected to defer $31,250 of salary from 2005. In August 2005 Mr.
Pizi
voluntarily reduced his annual salary to $150,000 for the year. Mr.
Pizi
was the Company’s Chief Executive Officer and Chairman until July 22,
2005.
|
(3)
|
Mr.
Pizi’s base salary for fiscal 2004 was $200,000. Mr. Pizi had voluntarily
elected to defer $50,000 of salary from 2004. In December 2004, Mr.
Pizi
received approximately $55,000 of deferred salary from 2004 and 2003
and
used those proceeds to participate in the Note and Warrant
Offering.
|
(4)
|
Mr.
Broderick’s base salary for fiscal 2006 was $150,000. As of December 31,
2006, Mr. Broderick is owed approximately $112,500 of deferred salary
and
$40,000 of earned bonus from 2003.
|
(5)
|
Mr.
Broderick’s base salary for 2005 was $200,000. Mr. Broderick had
voluntarily elected to defer $31,250 of salary from 2005. In August
2005,
Mr. Broderick voluntarily reduced his annual salary to $150,000 for
the
year. Mr. Broderick was appointed the Company’s Chief Executive Officer in
addition to being the Chief Financial Officer in July 2005. During
2005,
Mr. Broderick was paid $13,000 of his accrued bonus from
2003.
|
(6)
|
Mr.
Broderick’s base salary for 2004 was $200,000. Mr. Broderick voluntarily
elected to defer $50,000 of salary from 2004 and all of his earned
bonus
($60,000) from 2003.
|
Number
of Securities Underlying
Unexercised Options
at December 31, 2006
|
Value
of Unexercised In-the-Money Options
at
December
31, 2006(1)
|
||||||||||||||||||
Name
|
Shares
Acquired on
Exercise
|
Value
Realized
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||
Anthony
C. Pizi
|
--
|
--
|
15,000
|
-0-
|
-0-
|
-0-
|
|||||||||||||
John
P. Broderick
|
--
|
--
|
12,609
|
-0-
|
-0-
|
-0-
|
(1)
|
Based
on $2.30 per share, the December 31, 2006, closing price as quoted
on the
OTC Bulletin Board.
|
Common
Stock
|
|||||||
Name
of Beneficial Owner
|
No.
of Shares
|
Percent
of Class
|
|||||
QueeQueg
Partners, L.P. (1)
|
4,562,465
|
(2)
|
12.2
|
%
|
|||
Queequeg
Ltd. (1)
|
1,504,938
|
(3)
|
5
|
%
|
|||
Mark
and Carolyn P. Landis (4)
|
5,069,153
|
(5)
|
13.8
|
%
|
|||
Anthony
C. Pizi
|
1,416,241
|
(6)
|
4.0
|
%
|
|||
Bruce
Miller
|
1,337,118
|
(7)
|
3.8
|
%
|
|||
Bruce
Percelay
|
1,032,786
|
(8)
|
2.9
|
%
|
|||
John
P. Broderick
|
15,857
|
(9)
|
*
|
||||
John
W. Atherton
|
148,884
|
(10)
|
*
|
||||
Bruce
W. Hasenyager
|
33,652
|
(11)
|
*
|
||||
Charles
Porciello
|
80,286
|
(12)
|
*
|
||||
Jay
R. Kingley
|
1,000
|
(13)
|
*
|
||||
All
current directors and executive officers as a group (9
persons)
|
9,134,977
|
(14)
|
24.8
|
%
|
·
|
Represents
less than one percent of the outstanding
shares.
|
1.
|
The
address of QueeQueg Partners and QueeQueg Ltd. is 299 Park Avenue
New
York, New York 10071.
|
2.
|
As
of December 31, 2006, QueeQueg Partners, L.P. owns 4,539,475 shares
of
common stock, 9.643 shares of the Series A-1 Preferred Stock, and
13,347
shares issuable upon the exercise of warrants. The exercise prices
of the
warrants are as follows: 586 at $37.00 per share, 249 at $38.00 per
share
3,194 at $40.00 per share, and 9,318 at $10.00 per share. QueeQueg
Partners, L.P disclaims beneficial ownership of 4,029 warrant shares
because they are anti-dilutive.
|
3.
|
As
of December 31, 2006, QueeQueg, Ltd. owns 1,492,558 shares of common
stock, 5.193 shares of the Series A-1 Preferred Stock, and 7,187
shares
issuable upon the exercise of warrants. The exercise prices of the
warrants are as follows: 315 at $37.00 per share, 134 at $38.00 per
share
1,720 at $40.00 per share, and 5,018 at $10.00 per share. QueeQueg
Ltd
disclaims beneficial ownership of 2,169 warrant shares because they
are
anti-dilutive.
|
4.
|
The
address of Mark and Carolyn P. Landis is 503 Lake Drive, Princeton,
New
Jersey 08540.
|
5.
|
Includes
3,673,695 shares of common stock, 1,326.136 shares of the Series
A-1
Preferred Stock, and 69,322 shares issuable upon the exercise of
warrants.
The
exercise prices of the warrants are as follows: 18,750 at $8.00 per
share,
20,000 at $10.00 per share, and 30,572 at $10.00 per share. Disclaims
beneficial ownership of 38,750 shares because they are anti-dilutive.
|
6.
|
Includes
1,274,951 shares of common stock, 111.016 shares
of the Series A-1 Preferred Stock,
15,000 shares subject to stock options exercisable within sixty (60)
days,
and 15,274 shares of common stock issuable upon the exercise of warrants.
The exercise price of warrants is as follows: 901 shares at $17.00
per
share of common stock; 2,706 shares at $20.00 per share of common
stock;
and 11,667 shares at $10.00 per share of common stock. Disclaims
beneficial ownership of 18,607 shares of common stock because they
are
anti-dilutive.
|
7.
|
Consists
of 758,624 shares of common stock, 49.418
shares of the Series A-1 Preferred Stock, and 16,295 shares
of common stock issuable upon the exercise of warrants. The
exercise prices of the warrants are as follows: 451 at $37.00 per
share,
192 at $38.00 per share 2,457 at $40.00 per share, and 13,195 at
$10.00
per share.
Mr. Miller has sole or shared voting or dispositive power with respect
to
the securities held by Delphi Partners, Ltd., which holds 491,267
shares
of common stock, 18.000
shares of the Series A-1 Preferred Stock, and 3,514 shares
of common stock issuable upon the exercise of warrants at $10.00
per
share.
|
8.
|
Consists
of 1,032,786 shares of common
stock.
|
9.
|
Includes
3,248 shares of common stock and 12,609 shares subject to stock options
exercisable within sixty (60) days. Disclaims beneficial ownership
of
12,609 shares of common stock because they are
anti-dilutive.
|
10.
|
Includes
148,784 shares of common stock, and 100 shares of common stock held
in a
self-directed IRA.
|
11.
|
Consists
of 32,652 shares of common stock and 1,000 shares subject to stock
options
exercisable within sixty (60) days. Disclaims
beneficial ownership of 1,000 shares of common stock because they
are
anti-dilutive.
|
12.
|
Consists
of 80,286 shares of common stock.
|
13.
|
Consists
of 1,000
shares subject to stock options exercisable within sixty (60) days.
Disclaims
beneficial ownership of 1,000 shares of common stock because they
are
anti-dilutive.
|
14.
|
Includes
shares issuable upon exercise of options and warrants exercisable
within
sixty (60) days as described in Notes 7-14 to our Consolidated Financial
Statements.
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Financial
Statements:
|
|
Audited
Consolidated Financial Statements as of December 2006 and 2005 and
for the
years ended December 31, 2006, 2005, and 2004
|
F-3
|
/s/
Margolis & Company P.C.
|
|
Certified
Public Accountants
|
December
31,
2006
|
December
31,
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
310
|
$
|
29
|
|||
Assets
of operations to be abandoned
|
80
|
131
|
|||||
Trade
accounts receivable, net
|
170
|
18
|
|||||
Prepaid
expenses and other current assets
|
22
|
53
|
|||||
Total
current assets
|
582
|
231
|
|||||
Property
and equipment, net
|
15
|
10
|
|||||
Total
assets
|
$
|
597
|
$
|
241
|
|||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||
Current
liabilities:
|
|||||||
Senior
reorganization debt
(Note 2)
|
$
|
--
|
$
|
2,559
|
|||
Convertible
bridge notes (Note 2)
|
--
|
1,760
|
|||||
Short-term
debt
(Note 2)
|
2,899
|
3,481
|
|||||
Accounts
payable
|
2,360
|
2,528
|
|||||
Accrued
expenses:
|
|||||||
Salaries,
wages, and related items
|
1,012
|
1,036
|
|||||
Other
|
1,732
|
2,193
|
|||||
Liabilities
of operations to be abandoned
|
435
|
490
|
|||||
Deferred
revenue
|
38
|
78
|
|||||
Total
current liabilities
|
8,476
|
14,125
|
|||||
Long-term
debt
|
33
|
131
|
|||||
Senior
convertible redeemable preferred stock
(Note 2)
|
--
|
1,061
|
|||||
Total
liabilities
|
8,509
|
15,317
|
|||||
Commitments
and contingencies (Notes 15 and 16)
|
|||||||
Stockholders'
equity (deficit):
|
|||||||
Convertible
preferred stock, $0.001 par value, 10,000,000 shares
authorized.
|
--
|
--
|
|||||
Series
A-1 - 1,763.5 shares issued and outstanding at December 31, 2006,
$500 per
share liquidation preference (aggregate liquidation value of
$880)
|
--
|
--
|
|||||
Series
A3 - no shares outstanding at December 31, 2006, 10,070 shares issued
and
1,571 shares outstanding at December 31, 2005 , $1,000 per share
liquidation preference (aggregate liquidation value of
$1,571)
|
--
|
--
|
|||||
Series
B3 - no shares outstanding at December 31, 2006, 30,000 shares issued
and
outstanding at December 31, 2005, $1,000 per share liquidation preference
(aggregate liquidation value of $30,000)
|
--
|
--
|
|||||
Series
C - no shares outstanding at December 31, 2006, 1,590 shares issued
and
991 outstanding at December 31, 2005, $1,000 per share liquidation
preference (aggregate liquidation value of $991)
|
--
|
--
|
|||||
Common
stock, $0.001 par value, 215,000,000 shares authorized at December
31,
2006, 85,000,000 shares authorized at December 31, 2005; 35,182,406
and
480,399 issued and outstanding at December 31, 2006 and 2005, respectively
(Note 2)
|
35
|
48
|
|||||
Additional
paid-in-capital
|
226,407
|
210,594
|
|||||
Accumulated
deficit
|
(234,345
|
)
|
(225,715
|
)
|
|||
Accumulated
other comprehensive loss
|
(9
|
)
|
(3
|
)
|
|||
Total
stockholders' (deficit)
|
(7,912
|
)
|
(15,076
|
)
|
|||
Total
liabilities and stockholders' deficit
|
$
|
597
|
$
|
241
|
Years
Ended December 31,
|
||||||||||
2006
|
|
2005
|
|
2004
|
||||||
Revenue:
|
||||||||||
Software
|
$
|
208
|
$
|
407
|
$
|
239
|
||||
Maintenance
|
120
|
147
|
306
|
|||||||
Services
|
644
|
231
|
230
|
|||||||
Total
operating revenue
|
972
|
785
|
775
|
|||||||
Cost
of revenue:
|
||||||||||
Software
|
9
|
16
|
4,478
|
|||||||
Maintenance
|
212
|
350
|
382
|
|||||||
Services
|
546
|
822
|
1,015
|
|||||||
Total
cost of revenue
|
767
|
1,188
|
5,875
|
|||||||
Gross
margin (loss)
|
205
|
(403
|
)
|
(5,100
|
)
|
|||||
Operating
expenses:
|
||||||||||
Sales
and marketing
|
346
|
627
|
1,088
|
|||||||
Research
and product development
|
533
|
891
|
1,111
|
|||||||
General
and administrative
|
1,206
|
1,137
|
1,522
|
|||||||
Write-off
of intangible assets
|
-
|
-
|
587
|
|||||||
(Gain)
on disposal of assets
|
(24
|
)
|
-
|
(5
|
)
|
|||||
Total
operating expenses
|
2,061
|
2,655
|
4,303
|
|||||||
Loss
from operations
|
(1,856
|
)
|
(3,058
|
)
|
(9,403
|
)
|
||||
Other
income (charges):
|
||||||||||
Interest
expense
|
(853
|
)
|
(593
|
)
|
(264
|
)
|
||||
Change
in fair value of warrant liability
|
-
|
-
|
198
|
|||||||
Other
expense
|
(288
|
)
|
(30
|
)
|
(262
|
)
|
||||
(1,141
|
)
|
(623
|
)
|
(328
|
)
|
|||||
Loss
from continuing operations
|
(2,997
|
)
|
(3,681
|
)
|
(9,731
|
)
|
||||
Loss
from discontinued operations
|
-
|
-
|
(30
|
)
|
||||||
Net
loss
|
$ |
(2,997
|
)
|
$ |
(3,681
|
)
|
$ |
(9,761
|
)
|
|
Accretion
of preferred stock and deemed dividends
|
5,633
|
-
|
-
|
|||||||
Net
loss applicable to common stockholders
|
$ |
(8,630
|
)
|
$ |
(3,681
|
)
|
$ |
(9,761
|
)
|
|
Loss
per share:
|
||||||||||
Net
loss applicable to common stockholders - basic and diluted
|
$ |
(0.25
|
)
|
$ |
(8.27
|
)
|
$ |
(27.11
|
)
|
|
Weighted
average common shares outstanding - basic and diluted
|
35,182
|
445
|
360
|
Common
Stock
|
Preferred
Stock
|
Additional
Paid-in
|
Accumulated
|
Accumulated
Other
Comprehensive
Income
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
(Loss)
|
Total
|
||||||||||||||||||
Balance
at December 31, 2003
|
26,645
|
$
|
27
|
36
|
--
|
$
|
206,149
|
$ |
(212,273
|
)
|
$ |
(6
|
)
|
$ |
(6,103
|
)
|
|||||||||
Conversion
of preferred shares to common
|
824
|
1
|
(3
|
)
|
--
|
1
|
|||||||||||||||||||
Shares
issued as compensation
|
1,068
|
1
|
188
|
189
|
|||||||||||||||||||||
Shares
issued for bank guarantee
|
5,579
|
5
|
603
|
608
|
|||||||||||||||||||||
Conversion
of senior convertible redeemable preferred stock
|
3,792
|
4
|
1,210
|
1,214
|
|||||||||||||||||||||
Shares
issued in private placement of common stock
|
3,369
|
3
|
1,244
|
1,247
|
|||||||||||||||||||||
Issuance
of common stock from acquisition
|
2,027
|
2
|
748
|
750
|
|||||||||||||||||||||
Foreign
currency translation adjustment
|
(2
|
)
|
(2
|
)
|
|||||||||||||||||||||
Net
loss
|
|
|
|
(9,761
|
)
|
(9,761
|
)
|
||||||||||||||||||
Balance
at December 31, 2004
|
43,304
|
43
|
33
|
--
|
210,142
|
(222,034
|
)
|
(8
|
)
|
(11,857
|
)
|
||||||||||||||
Conversion
of preferred shares to common
|
395
|
--
|
--
|
||||||||||||||||||||||
Shares
issued as compensation
|
961
|
2
|
101
|
103
|
|||||||||||||||||||||
Shares
issued for bank guarantee
|
2,400
|
2
|
45
|
47
|
|||||||||||||||||||||
Conversion
of senior convertible redeemable preferred stock
|
957
|
1
|
306
|
307
|
|||||||||||||||||||||
Foreign
currency translation adjustment
|
5
|
5
|
|||||||||||||||||||||||
Net
loss
|
|
|
|
(3,681
|
)
|
(3,681
|
)
|
||||||||||||||||||
Balance
at December 31, 2005
|
48,017
|
48
|
33
|
--
|
210,594
|
(225,715
|
)
|
(3
|
)
|
(15,076
|
)
|
||||||||||||||
Reverse
stock split 100:1
|
(47,536
|
)
|
(48
|
)
|
(33
|
)
|
|
48
|
--
|
||||||||||||||||
Shares
issued from conversion of senior reorganization debt
|
3,438
|
3
|
1,705
|
1,708
|
|||||||||||||||||||||
Shares
issued from conversion of convertible bridge notes
|
30,508
|
32
|
3,877
|
3,909
|
|||||||||||||||||||||
Shares
issued for bank guarantee
|
96
|
312
|
312
|
||||||||||||||||||||||
Shares
issued from short term debt conversion
|
224
|
190
|
190
|
||||||||||||||||||||||
Shares
issued from conversion of convertible promissory notes
|
2
|
992
|
992
|
||||||||||||||||||||||
Conversion
of senior convertible redeemable preferred stock
|
1,061
|
1,061
|
|||||||||||||||||||||||
Conversion
of warrants
|
99
|
1,086
|
1,086
|
||||||||||||||||||||||
Shares
issued for interest conversion
|
211
|
629
|
629
|
||||||||||||||||||||||
Shares
issued as compensation
|
125
|
280
|
280
|
||||||||||||||||||||||
Accretion
of preferred stock
|
529
|
(529
|
)
|
--
|
|||||||||||||||||||||
Deemed
dividend
|
5,104
|
(5,104
|
)
|
--
|
|||||||||||||||||||||
Foreign
currency translation adjustment
|
(6
|
)
|
(6
|
)
|
|||||||||||||||||||||
Net
loss
|
(2,997
|
)
|
(2,997
|
)
|
|||||||||||||||||||||
Balance
at December 31, 2006
|
35,182
|
$
|
35
|
2
|
--
|
$
|
226,407
|
$ |
(234,345
|
)
|
$ |
(9
|
)
|
$ |
(7,912
|
)
|
Years
Ended December 31,
|
||||||||||
|
2006
|
2005
|
2004
|
|||||||
Net
loss
|
$ |
(2,997
|
)
|
$ |
(3,681
|
)
|
$ |
(9,761
|
)
|
|
Other
comprehensive income (loss), net of tax:
|
||||||||||
Foreign
currency translation adjustment
|
(6
|
)
|
5
|
(2
|
)
|
|||||
Comprehensive
loss
|
$ |
(3,003
|
)
|
$ |
(3,676
|
)
|
$ |
(9,763
|
)
|
Years
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$ |
(2,997
|
)
|
$ |
(3,681
|
)
|
$ |
(9,761
|
)
|
|
Adjustments
to reconcile net loss to net cash (used in) operating
activities:
|
||||||||||
Depreciation
and amortization
|
12
|
11
|
4,287
|
|||||||
Change
in fair value of warrant liability
|
--
|
--
|
(198
|
)
|
||||||
Stock
compensation expense
|
615
|
149
|
635
|
|||||||
Impairment
of intangible assets and software product technology
|
--
|
--
|
587
|
|||||||
Provision
(credit) for doubtful accounts
|
60
|
(12
|
)
|
(4
|
)
|
|||||
Gain
on disposal of assets
|
23
|
--
|
--
|
|||||||
Changes
in assets and liabilities, net of assets acquired and liabilities
assumed:
|
||||||||||
Trade
accounts receivable and related party receivables
|
(212
|
)
|
146
|
(143
|
)
|
|||||
Assets
and liabilities of operations to be abandoned
|
(27
|
)
|
(29
|
)
|
86
|
|||||
Prepaid
expenses and other assets
|
31
|
55
|
216
|
|||||||
Accounts
payable and accrued expenses
|
311
|
804
|
884
|
|||||||
Deferred
revenue
|
(40
|
)
|
(7
|
)
|
46
|
|||||
Net
cash (used in) operating activities
|
(2,224
|
)
|
(2,564
|
)
|
(3,365
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Purchases
of property and equipment
|
(17
|
)
|
(6
|
)
|
--
|
|||||
Net
cash (used in) investing activities
|
(17
|
)
|
(6
|
)
|
--
|
|||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of common shares, net of issuance costs
|
380
|
--
|
1,250
|
|||||||
Proceeds
from exercise of warrants
|
--
|
--
|
112
|
|||||||
Borrowings
under credit facility, term loans and notes payable
|
2,148
|
2,542
|
2,540
|
|||||||
Repayments
of term loans, credit facility and notes payable
|
--
|
(55
|
)
|
(447
|
)
|
|||||
Net
cash provided by financing activities
|
2,528
|
2,487
|
3,455
|
|||||||
Effect
of exchange rate changes on cash
|
(6
|
)
|
5
|
(2
|
)
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
281
|
(78
|
)
|
88
|
||||||
Cash
and cash equivalents at beginning of year
|
29
|
107
|
19
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
310
|
$
|
29
|
$
|
107
|
||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||
Cash
paid (refunds) during the year for:
|
||||||||||
Income
taxes
|
$
|
20
|
$
|
1
|
$
|
2
|
||||
Interest
|
$
|
865
|
$
|
645
|
$
|
749
|
NOTE
1.
|
SUMMARY
OF OPERATIONS, SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS
|
2006
|
2005
|
2004
|
||||||||
Stock
options
|
45,315
|
59,009
|
74,886
|
|||||||
Warrants
|
323,623
|
193,761
|
199,534
|
|||||||
Preferred
stock
|
1,763,478
|
85,046
|
98,557
|
|||||||
2,132,416
|
337,816
|
372,977
|
Years
Ended December 31,
|
|||||||
2005
|
2004
|
||||||
Net
loss applicable to common stockholders, as reported
|
$
|
(3,681
|
)
|
$
|
(9,761
|
)
|
|
Less:
Total stock-based employee compensation expense under fair
value based method for all awards, net of related tax
effects
|
(180
|
)
|
(777
|
)
|
|||
Pro
forma loss applicable to common stockholders
|
$
|
(3,861
|
)
|
$
|
(10,538
|
)
|
|
Loss
per share:
|
|||||||
Basic
and diluted, as reported
|
$
|
(8.27
|
)
|
$
|
(27.11
|
)
|
|
Basic
and diluted, pro forma
|
$
|
(8.68
|
)
|
$
|
(29.27
|
)
|
2006
|
|
2005
|
|
2004
|
||||||
Expected
life (in years)
|
3.6
years
|
6.0
years
|
4.19
years
|
|||||||
Expected
volatility
|
140
|
%
|
149
|
%
|
138
|
%
|
||||
Risk
free interest rate
|
4.93
|
%
|
4.48
|
%
|
4.75
|
%
|
||||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
0
|
%
|
NOTE
2.
|
RECAPITALIZATION
|
NOTE
3.
|
ACQUISITIONS
|
NOTE
4.
|
ACCOUNTS
RECEIVABLE
|
2006
|
|
2005
|
|||||
Current
trade accounts receivable
|
$
|
230
|
$
|
18
|
|||
Less:
allowance for doubtful accounts
|
60
|
--
|
|||||
$
|
170
|
$
|
18
|
NOTE
5.
|
PROPERTY
AND EQUIPMENT
|
2006
|
2005
|
||||||
Computer
equipment
|
$
|
252
|
$
|
246
|
|||
Furniture
and fixtures
|
8
|
8
|
|||||
Office
equipment
|
149
|
140
|
|||||
409
|
394
|
||||||
Less:
accumulated depreciation and amortization
|
(394
|
)
|
(384
|
)
|
|||
$
|
15
|
$
|
10
|
NOTE
6.
|
SOFTWARE
PRODUCT TECHNOLOGY
|
NOTE
7.
|
SHORT-TERM
DEBT AND CONVERTIBLE NOTES
|
2006
|
2005
|
||||||
Term
loan (a)
|
$
|
1,971
|
$
|
1,971
|
|||
Note
payable; related party (b)
|
9
|
9
|
|||||
Notes
payable (c)
|
950
|
509
|
|||||
Short
term convertible note (d)
|
--
|
265
|
|||||
Short
term convertible notes, related party (e)
|
--
|
727
|
|||||
$
|
2,930
|
$
|
3,481
|
(a)
|
The
Company has a $1,971 term loan bearing interest at LIBOR plus 1.5%
(approximately 6.38% at December 31, 2006). Interest is payable quarterly.
There are no financial covenants and the term loan is guaranteed
by Liraz
Systems Ltd., the Company’s former principal stockholder. The loan matures
on October 31, 2007. (See Note 14.)
|
(b)
|
From
time to time the Company borrowed money from the Company's Chief
Information Officer. The notes bear interest at 12% per annum. As
of
December 31, 2006, the Company is indebted to Anthony Pizi, the Company’s
former Chairman and CEO and current Chief Information Officer, in
the
amount of $9,000.
|
(c)
|
The
Company does not have a revolving credit facility and from time to
time
has issued a series of short term promissory notes with private lenders,
which provide for short term borrowings both secured and unsecured
by
accounts receivable. In addition, the Company has settled certain
litigation and agreed to a series of promissory notes to support
the
obligations. The notes bear interest between 10% and 12% per annum.
|
(d)
|
The
Company entered into convertible notes with private lenders. The
notes
bear interest between 12% and 18% per annum and allow for the conversion
of the principal amount due into common stock of the Company. In
April
2005, the Company entered into a convertible loan in the amount of
$30,000
with a member of the Company’s Board of Directors. Under the term of this
agreement, the loan bears interest at 1% per month and was convertible
upon the option of the note holder into 428,571 shares of our common
stock
at a conversion
|
(e)
|
The
Company entered into convertible promissory notes with Anthony Pizi,
the
Company’s Chief Information Officer and Mark and Carolyn Landis, who are
related by marriage to Anthony Pizi, and Mr. Landis is the Company’s
Chairman of the Board of Directors.
|
NOTE
8.
|
INCOME
TAXES
|
2006
|
2005
|
|
2004
|
|||||||
Expected
income tax benefit at statutory rate (34%)
|
$
|
(1,019
|
)
|
$
|
(1,251
|
)
|
$
|
(3,319
|
)
|
|
State
taxes, net of federal tax benefit.
|
(180
|
)
|
(308
|
)
|
(219
|
)
|
||||
Effect
of foreign operations including withholding taxes
|
--
|
--
|
12
|
|||||||
Effect
of change in valuation allowance
|
1,073
|
1,537
|
3,357
|
|||||||
Non-deductible
expenses
|
126
|
22
|
169
|
|||||||
Total
|
$
|
--
|
$
|
--
|
$
|
--
|
2006
|
2005
|
||||||
Current
assets:
|
|||||||
Allowance
for doubtful accounts
|
$
|
34
|
$
|
4
|
|||
Accrued
expenses, non-tax deductible
|
279
|
145
|
|||||
Deferred
revenue
|
15
|
31
|
|||||
Noncurrent
assets:
|
|||||||
Loss
carryforwards
|
91,016
|
89,528
|
|||||
Depreciation
and amortization
|
5,931
|
6,746
|
|||||
97,275
|
96,454
|
||||||
Less:
valuation allowance
|
(97,275
|
)
|
(96,454
|
)
|
|||
|
$ | -- |
$
|
--
|
NOTE
9.
|
STOCKHOLDERS’
EQUITY
|
Plan
Activity
|
Option
Price Per
Share
|
Weighted
Average Exercise
Price
|
||||||||
Balance
at December 31, 2003
|
56,259
|
20.00-3,931.00
|
243.00
|
|||||||
Granted
|
31,392
|
12.00
-39.00
|
26.00
|
|||||||
Exercised
|
(5,192
|
)
|
8.00
-37.00
|
17.00
|
||||||
Forfeited
|
(7,572
|
)
|
22.00-3,788.00
|
812.00
|
||||||
Balance
at December 31, 2004
|
74,887
|
12.00-3,931.00
|
111.00
|
|||||||
Granted
|
2,529
|
7.00
- 12.00
|
9.00
|
|||||||
Exercised
|
(2,529
|
)
|
7.00
- 12.00
|
9.00
|
||||||
Forfeited
|
(15,877
|
)
|
22.00-3,931.00
|
75.00
|
||||||
Balance
at December 31, 2005
|
59,010
|
12.00-3,931.00
|
124.00
|
|||||||
Forfeited
|
(13,695
|
)
|
22.00-3,931.00
|
137.14
|
||||||
Balance
at December 31, 2006
|
45,315
|
12.00-3,931.00
|
120.61
|
EXERCISE
PRICE
|
NUMBER
OUTSTANDING/
EXERCISABLE
|
REMAINING
CONTRACTUAL LIFE
FOR OPTIONS OUTSTANDING
|
WEIGHTED
AVERAGE
EXERCISE
PRICE
|
|||||||
$
12.00 - 393.12
|
39,680
|
6.4
|
$
|
48.03
|
||||||
393.13
-786.25
|
5,350
|
4.1
|
586.35
|
|||||||
786.26-1,179.37
|
165
|
3.0
|
944.41
|
|||||||
1,179.38-1,572.50
|
50
|
1.0
|
1,473.00
|
|||||||
1,572.60-1,965.62
|
40
|
3.6
|
1,881.25
|
|||||||
1,965.62-3,538.12
|
0
|
0.0
|
0.00
|
|||||||
3,538.13-3,931.25
|
30
|
3.2
|
3,931.25
|
|||||||
45,315
|
6.1
|
$
|
120.61
|
Expected
Life in Years
|
Expected
Volatility
|
Risk
Free Interest Rate
|
Expected
Dividend
|
Fair
Value of Common Stock
|
||||||||||||
2002-2003
Financing Warrants
|
5
|
97
|
%
|
2
|
%
|
None
|
$
|
0.40
|
||||||||
Preferred
Series C Warrants
|
5
|
117
|
%
|
3
|
%
|
None
|
$
|
0.38
|
||||||||
Preferred
Series D-1 Warrants
|
5
|
117
|
%
|
3
|
%
|
None
|
$
|
0.07
|
||||||||
Preferred
Series D-2 Warrants
|
5
|
102
|
%
|
3
|
%
|
None
|
$
|
0.20
|
||||||||
Private
Placement - January 2004
|
3
|
101
|
%
|
3
|
%
|
None
|
$
|
0.36
|
||||||||
Early
Adopter Warrants
|
4
|
104
|
%
|
4
|
%
|
None
|
$
|
1.50
|
NOTE
10.
|
EMPLOYEE
BENEFIT PLANS
|
NOTE
11.
|
SIGNIFICANT
CUSTOMERS AND CONCENTRATION OF CREDIT
RISK
|
NOTE
12.
|
FOREIGN
CURRENCIES
|
NOTE
13.
|
SEGMENT
INFORMATION AND GEOGRAPHIC
INFORMATION
|
For
the year ended December 31,
|
||||||||||||||||||||||||||||
2006
|
2005
|
2004
|
||||||||||||||||||||||||||
Desktop
Integration
|
Messaging
and Application Engineering
|
Total
|
Desktop
Integration
|
Messaging
and Application Engineering
|
Total
|
Desktop
Integration
|
Messaging
and Application Engineering
|
Total
|
||||||||||||||||||||
Total
revenue
|
$
|
965
|
$
|
7
|
$
|
972
|
$
|
760
|
$
|
25
|
$
|
785
|
$
|
707
|
$
|
68
|
$
|
775
|
||||||||||
Total
cost of revenue
|
767
|
--
|
767
|
1,188
|
--
|
1,188
|
5,662
|
213
|
5,875
|
|||||||||||||||||||
Gross
margin (loss)
|
198
|
7
|
205
|
(428
|
)
|
25
|
(403
|
)
|
(4,955
|
)
|
(145
|
)
|
(5,100
|
)
|
||||||||||||||
Total
operating expenses
|
1,964
|
121
|
2,085
|
2,536
|
119
|
2,655
|
3,348
|
373
|
3,721
|
|||||||||||||||||||
Segment
profitability (loss)
|
$
|
(1,766
|
)
|
$
|
(114
|
)
|
$
|
(1,880
|
)
|
$
|
(2,964
|
)
|
$
|
(94
|
)
|
$
|
(3,058
|
)
|
$
|
(8,303
|
)
|
$
|
(518
|
)
|
$
|
(8,821
|
)
|
2006
|
2005
|
2004
|
||||||||
Segment
operating expenses
|
$
|
2,085
|
$
|
2,655
|
$
|
3,721
|
||||
Write-off
of intangible assets
|
--
|
--
|
587
|
|||||||
(Gain)
on disposal of assets
|
(24
|
)
|
--
|
(5
|
)
|
|||||
Total
operating expenses
|
$
|
2,061
|
$
|
2,655
|
$
|
4,303
|
2006
|
2005
|
2004
|
||||||||
Total
segment profitability (loss)
|
$
|
(1,880
|
)
|
$
|
(3,058
|
)
|
$
|
(8,821
|
)
|
|
Write-off
of intangible assets
|
--
|
--
|
(587
|
)
|
||||||
Gain/
on disposal of assets
|
24
|
--
|
5
|
|||||||
Interest
and other income/(expense), net
|
(1,141
|
)
|
(623
|
)
|
(328
|
)
|
||||
Net
loss before provision for income taxes
|
$
|
(2,997
|
)
|
$
|
(3,681
|
)
|
$
|
(9,731
|
)
|
2006
|
2005
|
||||||
Desktop
Integration
|
$
|
15
|
$
|
10
|
|||
Messaging/Application
Engineering
|
-
|
-
|
|||||
Total
assets
|
$
|
15
|
$
|
10
|
2006
|
2005
|
2004
|
||||||||
Denmark
|
$
|
-
|
$
|
-
|
$
|
7
|
||||
Italy
|
-
|
2
|
4
|
|||||||
United
Kingdom
|
-
|
-
|
1
|
|||||||
USA
|
972
|
783
|
762
|
|||||||
Other
|
-
|
-
|
1
|
|||||||
$
|
972
|
$
|
785
|
$
|
775
|
NOTE
14.
|
RELATED
PARTY INFORMATION
|
NOTE
15.
|
LEASE
COMMITMENTS
|
Lease
Commitments
|
||||
2007
|
$
|
59
|
||
2008
|
6
|
|||
$
|
65
|
NOTE
16.
|
CONTINGENCIES
|
NOTE
17.
|
SELECTED
QUARTERLY FINANCIAL DATA
(UNAUDITED)
|
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||
(In
thousands, except per share data)
|
|||||||||||||
2006:
|
|||||||||||||
Net
revenues
|
$
|
281
|
$
|
320
|
$
|
248
|
$
|
123
|
|||||
Gross
margin/(loss)
|
75
|
114
|
60
|
(44
|
)
|
||||||||
Net
loss
|
(576
|
)
|
(515
|
)
|
(647
|
)
|
(1,259
|
)
|
|||||
Net
loss/share -basic and diluted
|
$
|
(1.20
|
)
|
$
|
(1.07
|
)
|
$
|
(1.35
|
)
|
$
|
(0.25
|
)
|
|
2005:
|
|||||||||||||
Net
revenues
|
$
|
153
|
$
|
461
|
$
|
84
|
$
|
87
|
|||||
Gross
margin/(loss)
|
(179
|
)
|
106
|
(201
|
)
|
(129
|
)
|
||||||
Net
loss
|
(1,031
|
)
|
(738
|
)
|
(943
|
)
|
(969
|
)
|
|||||
Net
loss/share -basic and diluted
|
$
|
(2.37
|
)
|
$
|
(1.70
|
)
|
$
|
(2.12
|
)
|
$
|
(2.08
|
)
|
NOTE
18.
|
SUBSEQUENT
EVENTS
|
Item
13:
|
Other
Expenses of Issuance and
Distribution
|
SEC
Registration Fee
|
$
|
1,385
|
||
Accounting
Fees and Expenses
|
5,000
|
|||
Legal
Fees and Expenses
|
30,000
|
|||
Miscellaneous
|
1,590
|
|||
Total
|
$
|
37,975
|
Item
14:
|
Indemnification
of Directors and Officers
|
Item
15:
|
Recent
Sales of Unregistered
Securities
|
Item
16:
|
Exhibits
and Financial Statement
Schedule
|
Exhibit
Number
|
|
Description
|
2.1
|
Asset
Purchase Agreement, dated as of January 9, 2004, by and among Level
8
Systems, Inc. and Critical Mass Mail, Inc. (incorporated by reference
to
exhibit 2.1 to Level 8’s Form 8-K filed January 23, 2004).
|
3.1
|
Certificate
of Incorporation of Level 8 Systems, Inc., a Delaware corporation,
as
amended and restated December 29, 2006 (incorporated by reference
to
exhibit 3.1 to Level 8’s Form 8-K filed January 17,
2007).
|
|
3.2
|
Certificate
of Designation relating to Series A1 Convertible Redeemable Preferred
Stock (incorporated by reference to exhibit 3.2 to Level 8’s Form 8-K
filed January 17, 2007).
|
|
3.3
|
Certificate
of Designation relating to Series A3 Convertible Redeemable Preferred
Stock, as amended December 29, 2006 (incorporated by reference to
exhibit
3.3 to Level 8’s Level 8’s Form 8-K filed January 17,
2007).
|
|
3.4
|
Certificate
of Designation relating to Series B3 Convertible Redeemable Preferred
as
amended December 29, 2006 (incorporated by reference to exhibit 3.4
to
Level 8’s Level 8’s Form 8-K filed January 17, 2007).
|
|
3.5
|
Certificate
of designation relating to Series C Convertible Redeemable Preferred
Stock
as amended December 29, 2006 (incorporated by reference to exhibit
3.5 to
Level 8’s Level 8’s Form 8-K filed January 17, 2007).
|
|
3.6
|
Certificate
of designation relating to Series D Convertible Redeemable Preferred
Stock
as amended December 29, 2006 (incorporated by reference to exhibit
3.5 to
Level 8’s Level 8’s Form 8-K filed January 17,
2007).
|
3.7
|
Certificate
of Incorporation of Level 8 Systems, Inc., a Delaware corporation,
as
amended August 4, 2003 (incorporated by reference to exhibit 3.1
to Level
8’s Form 10-K filed March 31, 2004).
|
|
3.8
|
Bylaws
of Level 8 Systems, Inc., a Delaware corporation (incorporated by
reference to exhibit 3.2 to Level 8’s Form 10-K filed April 2,
2002).
|
|
3.9
|
Certificate
of Designations, Preferences and Rights dated March 19, 2003 relating
to
Series D Convertible Redeemable Preferred Stock (incorporated by
reference
to exhibit 3.1 to Level 8's Form 8-K, filed March 31,
2003).
|
|
3.10
|
Certificate
of Designation relating to Series A3 Convertible Redeemable Preferred
Stock (incorporated by reference to exhibit 3.1 to Level 8’s Form 10-Q
filed November 15, 2002).
|
|
3.11
|
Certificate
of Designation relating to Series B3 Convertible Redeemable Preferred
Stock (incorporated by reference to exhibit 3.1 to Level 8’s Form 10-Q
filed November 15, 2002).
|
|
3.12
|
Certificate
of designation relating to Series C Convertible Redeemable Preferred
Stock
(incorporated by reference to exhibit 3.1 to Level 8’d Form 8-K filed
August 27, 2002).
|
|
Registration
Rights Agreement dated February 2007, by and among Cicero Inc. and
the
Purchasers in the 2007 Private Placement listed on Schedule I thereto
relating to the Security Purchasers Agreement (filed
herewith).
|
||
4.2
|
Registration
Rights Agreement dated July 2006, by and among Level 8 Systems, Inc.
and
the Purchasers in the Convertible Bridge Notes listed on Schedule
I
thereto relating to the Security Purchasers Agreement (incorporated
by
reference to exhibit 4.1 to Cicero’s Report on Form 10-K, filed March 30,
2007).
|
|
4.3
|
Registration
Rights Agreement dated July 2006, by and among Level 8 Systems, Inc.
and
the Purchasers in the Senior Placement listed on Schedule I thereto
relating to the Security Purchasers Agreement (incorporated by reference
to exhibit 4.1 to Cicero’s Report on Form 10-K, filed March 30,
2007).
|
|
4.4
|
Registration
Rights Agreement, dated January 2004, by and among Level 8 Systems,
Inc.
and the Purchasers in the January 2004 Private Placement listed on
Schedule I thereto relating to the Security Purchasers Agreement
(incorporated by reference to exhibit 4.1 to Level 8’s Form 10-K/A filed
April 21, 2004).
|
|
4.5
|
Registration
Rights Agreement dated as of March 19, 2003 by and among Level 8
Systems,
Inc. and the Purchasers listed on Schedule I thereto relating to
the
Series D Convertible Redeemable Preferred Stock (incorporated by
reference
to exhibit 4.1 to Level 8’s Form 8-K, filed March 31,
2003).
|
|
4.6
|
Registration
Rights Agreement dated as of October 15, 2003 by and among Level
8
Systems, Inc. and the Purchasers in the October Private Placement
listed
on schedule I thereto (incorporated by reference to exhibit 4.2 to
Level
8’s Form 10-K, filed March 31, 2004).
|
|
4.7
|
Registration
Rights Agreement, dated as of January 16, 2002, by and among Level
8
Systems, Inc. and the Purchasers in the January Private Placement
listed
on Schedule I thereto (incorporated by reference to exhibit 4.1 to
Level
8's Report on Form 8-K, filed January 25, 2002).
|
|
4.8
|
Registration
Rights Agreement, dated as of January 3, 2002, between Level 8 Systems,
Inc. and MLBC, Inc. (incorporated by reference to exhibit 4.1 to
Level 8's
Report on Form 8-K, filed January 11, 2002).
|
|
4.9
|
Registration
Rights Agreement, dated as of August 29, 2002, entered into by and
between
Level 8 Systems, Inc. and the holders of Series A2/A3 Preferred Stock
and
Series B2/B3 Preferred Stock (incorporated by reference to exhibit
10.4 to
Level 8’s Form 8-K filed August 30,
2002).
|
4.9A
|
First
Amendment to Registration Rights Agreement, dated as of October 25,
2002,
entered into by and between Level 8 Systems, Inc. and the holders
of
Series A2/A3 Preferred Stock and Series B2/B3 Preferred Stock
(incorporated by reference to exhibit 10.4 to Level 8’s Form 10-Q filed
November 15, 2002).
|
|
4.10
|
Registration
Rights Agreement, dated as of June 13, 1995, between Level 8 Systems,
Inc.
and Liraz Systems Ltd. (incorporated by reference to exhibit 10.24
to
Across Data Systems, Inc.'s (Level 8's predecessor) Registration
Statement
on Form S-1, filed May 12, 1995, File No. 33-92230).
|
|
4.10A
|
First
Amendment to Registration Rights Agreement, dated as of August 8,
2001, to
the Registration Rights Agreement dated as of June 13, 1995, by and
between Across Data Systems, Inc. (Level 8's predecessor) and Liraz
Systems Ltd. (incorporated by reference to exhibit 4.1 to Level 8's
Report
on Form 8-K, filed August 14, 2001).
|
|
4.11
|
Registration
Rights Agreement, dated as of August 14, 2002, entered into by and
between
Level 8 Systems, Inc. and the investors in Series C Preferred Stock
(incorporated by reference to exhibit 4.1 to Level 8’s Form 8-K filed
August 27, 2002).
|
|
4.12
|
Form
of Registration Rights Agreement, dated January 2004, by and among
Level 8
Systems, Inc. and the Purchasers of Convertible Promissory Note
(incorporated by reference to exhibit 4.2 to Level 8's Report on
Form
10-Q, filed May 12, 2004).
|
|
4.13
|
Form
of Stock Purchase Warrant issued to Purchasers in the January 2004
Private
Placement (incorporated by reference to exhibit 4.3 to Level 8's
Report on
Form 10-Q, filed May 12, 2004).
|
|
4.14
|
Form
of Stock Purchase Warrant issued to Purchasers of Convertible Promissory
Note (incorporated by reference to exhibit 4.3 to Level 8's Report
on Form
10-Q, filed May 12, 2004).
|
|
4.15
|
Form
of Warrant issued to the Purchasers in the Series D Preferred Stock
transaction dated as of March 19, 2003 (incorporated by reference
to
exhibit 4.2 to Level 8's Form 8-K, filed March 31,
2003).
|
|
4.16
|
Form
of Stock Purchase Warrant issued to Purchasers in the October 2003
Private
Placement (incorporated by reference to exhibit 4.9 to Level 8’s Form
10-K, filed March31, 2004).
|
|
4.17
|
Form
of Stock Purchase Warrant issued to the Purchasers in the January
Private
Placement (incorporated by reference to exhibit 10.2 to Level 8's
Report
on Form 8-K, filed January 25, 2002).
|
|
4.18
|
Form
of Series A3 Stock Purchase Warrant (incorporated by reference to
exhibit
10.2 of Level 8’s Form 10-Q filed November 15, 2002).
|
|
4.19
|
Form
of Series B3 Stock Purchase Warrant (incorporated by reference to
exhibit
10.3 of Level 8’s Form 10-Q filed November 15, 2002).
|
|
4.20
|
Form
of Series C Stock Purchase Warrant (incorporated by reference to
exhibit
10.2 to Level 8’s Form 8-K filed August 27, 2002)
|
|
5.1
|
Legal
Opinion of Golenbock Eiseman Assor Bell & Peskoe LLP **.
|
|
Securities
Purchase Agreement for 2007 Private Placement (filed
herewith).
|
||
10.2
|
Securities
Purchase Agreement for Consortium IV (incorporated by reference to
exhibit
10.1 to Cicero’s Report on Form 10-K, filed March 30,
2007).
|
|
10.3
|
Securities
Purchase Agreement dated January 2004 by and among Level 8 Systems,
Inc.
and the Purchasers in the January 2004 Private Placement (incorporated
by
reference to exhibit 10.1 to Level 8’s Form 10-K/A filed April 21,
2004).
|
|
10.4
|
Securities
Purchase Agreement dated March 2004 by and among Level 8 Systems,
Inc. and
the Purchasers of Convertible Promissory Note (incorporated by reference
to exhibit 10.2 to Level 8's Form 10-Q, filed May 12,
2004).
|
|
10.5
|
Form
of Convertible Promissory Note dated March 2004 by and among Level
8
Systems, Inc. and the Purchasers of Convertible Promissory Note
(incorporated by reference to exhibit 10.3 to Level 8's Form 10-Q,
filed
May 12, 2004).
|
|
10.6
|
Securities
Purchase Agreement dated as of March 19, 2003 by and among Level
8
Systems, Inc. and the Purchasers (incorporated by reference to exhibit
10.1 to Level 8's Form 8-K, filed March 31, 2003).
|
|
10.7
|
Securities
Purchase Agreement dated as of October 15, 2003 by and among Level
8
Systems, Inc. and the Purchasers in the October Private Placement
(incorporated by reference to exhibit 10.2 to Level 8’s Form 10-K, filed
March 31, 2004).
|
|
10.8
|
Securities
Purchase Agreement, dated as of January 16, 2002, by and among Level
8
Systems, Inc. and the Purchasers in the January Private Placement
(incorporated by reference to exhibit 10.1 to Level 8's Report on
Form
8-K, filed January 25, 2002).
|
|
10.9
|
Purchase
Agreement, dated as of January 3, 2002, between Level 8 Systems,
Inc. and
MLBC, Inc. (incorporated by reference to exhibit 10.1 to Level 8's
Report
on Form 8-K, filed January 11, 2002).
|
|
10.9A
|
Purchase
Agreement, dated as of July 31, 2000, between Level 8 Systems, Inc.
and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by
reference to Exhibit 10.1 to Level 8's Report on Form 8-K, filed
August
11, 2000).
|
|
10.10
|
Securities
Purchase Agreement, dated as of August 14, 2002, by and among Level
8
Systems, Inc. and the purchasers of the Series C Preferred Stock
(incorporated by reference to exhibit 10.1 to Level 8’s Form 8-K filed
August 27, 2002).
|
|
10.11
|
Agreement
by and among Level 8 Systems, Inc. and the holders of Series A1/A2/A3
and
B1/B2/B3 Preferred Stock, dated as of August 14, 2002 (incorporated
by
reference to exhibit 10.3 to Level 8’s Form 8-K filed August 27,
2002).
|
|
10.12
|
Exchange
Agreement among Level 8 Systems, Inc., and the various stockholders
identified and listed on Schedule I, dated as of August 29, 2002
(incorporated by reference to exhibit 10.1 to Level 8’s Form 8-K filed
August 30, 2002).
|
|
10.12A
|
First
Amendment to Exchange Agreement, dated as of October 25, 2002, among
Level
8 Systems, Inc., and the various stockholders identified and listed
on
Schedule I to that certain Exchange Agreement, dated as of August
29, 2002
(incorporated by reference to exhibit 10.1 to Level 8’s Form 10-Q filed
November 15, 2002).
|
|
10.12B
|
Securities
Purchase Agreement, dated as of June 29, 1999, among Level 8 Systems,
Inc.
and the investors named on the signature pages thereof for the purchase
of
Series A Preferred Stock (incorporated by reference to exhibit 10.1
to
Level 8's Form 8-K filed July 23, 1999).
|
|
10.12C
|
Securities
Purchase Agreement, dated as of July 20, 2000, among Level 8 Systems,
Inc.
and the investors named on the signature pages thereof for the purchase
of
Series B Preferred Stock (incorporated by reference to Exhibit 10.1
to
Level 8's Report on Form 8-K filed July 31,
2000).
|
10.13
|
Amended
PCA Shell License Agreement, dated as of January 3, 2002, between
Level 8
Systems, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
(incorporated by reference to exhibit 10.2 to Level 8's Form 8-K,
filed
January 11, 2002).
|
|
10.13A
|
PCA
Shell License Agreement between Level 8 Systems, Inc. and Merrill
Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by reference to
exhibit 10.2 to Level 8’s Report on Form 8-K, filed September 11,
2000).
|
|
10.14
|
Promissory
Note of Level 8 Systems, Inc., dated as of September 28, 2001, among
Level
8 Systems, Inc. and Bank Hapoalim (incorporated by reference to exhibit
10.2 to Level 8’s Form 10-K filed April 2, 2002).
|
|
10.14
A
|
Amendment
No. 1 to Promissory Note of Level 8 Systems, Inc., dated as of October
30,
2006, letter dated October 30, 2006, and Late Payment Rider among
Level 8
Systems, Inc. and Bank Hapoalim (incorporated by reference to exhibit
10.14 A to Cicero’s Report on Form 10-K, filed March 30,
2007).
|
|
10.14
A
|
Amendment
No. 2 to Promissory Note of Level 8 Systems, Inc., dated as of November
30, 2005 and letter dated November 3, 2005 among Level 8 Systems,
Inc. and
Bank Hapoalim (incorporated by reference to exhibit 10.14 A to Cicero’s
Report on Form 10-K, filed March 30, 2007).
|
|
10.14
B
|
Amendment
No. 1 to Promissory Note of Level 8 Systems, Inc., dated as of November
8,
2004 and letter dated November 8, 2004 among Level 8 Systems, Inc.
and
Bank Hapoalim (incorporated by reference to exhibit 10.14A to Level
8’s
Form 10-K/A filed April 21, 2004).
|
|
10.14
C
|
Amendment
to Promissory Note of Level 8 Systems, Inc., dated as of November
15, 2003
among Level 8 Systems, Inc. and Bank Hapoalim (incorporated by reference
to exhibit 10.10 A to Level 8’s Form 10-K, filed March 31,
2004).
|
|
10.15
|
Employment
Agreement between Anthony Pizi and the Company effective January
1, 2006
(incorporated by reference to exhibit 10.15 to Cicero’s Report on Form
10-K, filed March 30, 2007).*
|
|
10.16
|
Employment
Agreement between John P. Broderick and the Company effective January
1,
2006 (incorporated by reference to exhibit 10.16 to Cicero’s Report on
Form 10-K, filed March 30, 2007).*
|
|
10.17
|
Level
8 Systems Inc. 1997 Stock Option Plan, as Amended and Restated
(incorporated by reference to exhibit 10.2 to Level 8’s Registration
Statement of Form S-1/A, filed September 22, 2000, File No.
333-44588).*
|
|
10.17A
|
Fifth
Amendment to Level 8 Systems Inc. 1997 Stock Option Plan (incorporated
by
reference to exhibit 10.9A to Level 8’s Form 10-K filed April 2,
2002).*
|
|
10.17B
|
Seventh
Amendment to Level 8 Systems Inc. 1997 Stock Option Plan (incorporated
by
reference to exhibit 10.14 B to Level 8’s Form 10-K, filed March 31,
2004).*
|
|
10.18
|
Lease
Agreement for Cary, N.C. offices, dated March 31, 1997, between Seer
Technologies, Inc. and Regency Park Corporation (incorporated by
reference
to exhibit 10.47 to Seer Technologies, Inc.'s Quarterly Report on
Form
10-Q for the period ended March 31, 1997, File No.
000-26194).
|
|
10.18A
|
Addendum
#1 to the Lease Agreement for Cary, N.C. offices, dated July 6, 1998
(incorporated by reference to exhibit 10.58 to Seer Technology Inc.'s
Quarterly Report on Form 10-Q for the period ended June 30, 1998,
File No.
000-26194).
|
|
10.18B
|
Amendment
to Lease Agreement for Cary, N.C. offices, dated January 21, 1999
(incorporated by reference to exhibit 10.21A to Level 8's Annual
Report on
Form 10-K for the fiscal year ended December 31,
1998).
|
10.19
|
Lease
Agreement for Cary, N.C. offices, dated November 7, 2003, between
Level 8
Systems, Inc. and Regency Park Corporation (incorporated by reference
to
exhibit 10.17 to Level 8’s Form 10-K, filed March 31,
2004).
|
|
10.20
|
Office
Lease Agreement, dated April 25, 1996, between Template Software,
Inc. and
Vintage Park Two Limited Partnership (incorporated by reference to
an
exhibit to Template Software, Inc.'s Registration Statement on Form
S-1,
File No. 333-17063).
|
|
10.20A
|
Amendment
to Office Lease Agreement, dated August 18, 1997, between Template
Software, Inc. and Vintage Park Two Limited Partnership (incorporated
by
reference to an exhibit to Template Software, Inc.'s Annual Report
on Form
10-K for the fiscal year ended December 31, 1997, File No.
000-21921).
|
|
10.20
|
Lease
Agreement, dated February 23, 2001, between Level 8 Systems, Inc.
and
Carnegie 214 Associates Limited Partnership (incorporated by reference
to
exhibit 10.15 to Level 8's Annual Report on Form 10-K, filed March
29,
2001).
|
|
14.1
|
Code
of Ethics (incorporated by reference to exhibit 14.1 to Level 8’s Form
10-K/A, filed March 31, 2004).
|
|
16.1
|
Letter
from Margolis & Company PC regarding change of accountant
(incorporated by reference to Exhibit 16.1 to Level 8’s Current Report on
Form 8-K, filed February 6, 2004).
|
|
21.1
|
List
of subsidiaries of the Company (incorporated by reference to exhibit
21.1
to Cicero’s Annual Report on Form 10-K, filed March 30,
2007).
|
|
Consent
of Margolis & Company P.C. (filed herewith).
|
||
23.2
|
Consent
of Golenbock Eiseman Assor Bell & Peskoe LLP
**.
|
Item
17:
|
Undertakings
|
CICERO
INC.
|
|||
|
|||
By:
|
/s/ John P. Broderick
|
||
John
P. Broderick
|
|||
Chief
Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/
Mark Landis
|
Chairman
of the Board
|
April
19, 2007
|
||
Mark
Landis
|
||||
|
||||
/s/
John P. Broderick
|
Chief
Executive Officer/Chief Financial Officer
|
April
19, 2007
|
||
John
P. Broderick
|
(Principal
Executive Officer)
|
|||
/s/
Anthony C. Pizi
|
Chief
Information Officer
|
April
19, 2007
|
||
Anthony
C. Pizi
|
||||
/s/
Bruce Hasenyager
|
Director
|
April
19, 2007
|
||
Bruce
Hasenyager
|
||||
/s/
Jay Kingley
|
Director
|
April
19, 2007
|
||
Jay
Kingley
|
||||
/s/
Bruce D. Miller
|
Director
|
April
19, 2007
|
||
Bruce
D. Miller
|
||||
/s/
Charles Porciello
|
Director
|
April
19, 2007
|
||
Charles
Porciello
|
||||
|
||||
/s/
Bruce Percelay
|
Director
|
April
19, 2007
|
||
Bruce
Percelay
|
||||
/s/
John W. Atherton
|
Director
|
April
19, 2007
|
||
John
W. Atherton
|